Facing continued uncertainty in the global credit markets and a steep decline in stock markets around the globe, the volume of worldwide mergers and acquisitions totaled $1.6 trillion in announced deals during the first half of 2008, a decrease of 36% over the record-breaking first half of 2007 and the lowest levels for first half deal activity since the opening six months of 2006, according to ?Mergers & Acquisitions Review? from Thomson Reuters/Freeman & Co.
The study also said that private equity firms, a major driver of worldwide mergers and acquisitions over the past three years, were left largely on the sidelines during the first half of 2008 as dealmakers approached the one year anniversary of the global credit crisis. With just $152.4 billion in announced deals, the volume of financial sponsor-backed transactions reached its lowest levels since 2005.
With little financing opportunities available for private equity firms to make acquisitions, not one leveraged buyout over $5 billion has been announced since July 2007. As a result, financial sponsors accounted for just over 9% of announced transactions during the first six months of 2008 compared to 25% during the first half of 2007.
However, worldwide announced M&A for the second quarter of 2008 totaled $885.5 billion, a 30% increase from the first quarter of 2008. Activity in Europe declined 43% over the year-ago period to reach $534.7 billion during the first half of 2008, while Africa/Middle East saw declines of 18%.
Deals in Japan saw a decrease of 44%, and deal volume in the United States tumbled 40%, accounting for 38% of worldwide volume compared to 41% during the first half of 2007.
Bolstered by strong deal activity in Australia and China, volume in Asia Pacific increased by 24% and was the only region to see advancing deal volume over the first half of 2007. Keeping pace with declines in new deal announcements, imputed fees for completed M&A financial advisory assignments fell 30% to $15.9 of 2008 compared to $22.7 billion during the same period last year.
Cross border deal activity, aided by emerging economies with cash to spend and favorable exchange rates in the US, totaled $630.9 billion during the first half of 2008 or 40% of worldwide M&A volume. Last year at this time, cross border acquisitions accounted for 44% of overall volume.
Demonstrating the confidence of strong global corporations, unsolicited transactions nearly tripled during the first half 2008, totaling $237.0 billion compared to $29.8 billion during the same period last year.
