Dealmaking dropped 22% to $504 billion from the prior three-month period, according to data compiled by Bloomberg, as European suitors retreated. St Louis-based Express Scriptss $29.1 billion bid for Medco Health Solutions and Tokyo-based Nippon Steels $9.5 billion offer for Sumitomo Metal Industries blunted the drop.
US and Asian companies are putting stockpiles of cash to work as a dimming economic outlook makes it more difficult for them to expand on their own. While their counterparts in Europe are also seeking growth, the deepening debt crisis there discouraged some from pursuing deals.
The broader economic climate in Europe is bringing uncertainty to decision-making, said Hernan Cristerna, head of M&A for Europe, the West Asia and Africa at JPMorgan Chase, the top adviser on deals this year. New mandates have been coming through, but we are realistic that it might be difficult to execute some of them in the current environment.
The rout in Europe imperils what is on track to be the second year of a global recovery in dealmaking. Companies have struck $1.78 trillion of deals this year, 18% more than the $1.51 trillion they put together at the same point in 2010.
For every $2 US companies spent on acquisitions in the third quarter, European ones spent less than $1. For most of the past decade, US and Europe disbursed about the same amount.
US deals included two big bets by technology giants: Googles $12.5 billion offer for Motorola Mobility Holdings and Hewlett-Packards proposed $10.3 billion acquisition of UK software maker Autonomy Corp. Melbournes BHP Billiton bought Houston-based Petrohawk Energy for about $12 billion, its largest acquisition.
We are continuing to see healthy activity in both the tech and in natural resources sectors, but the macro environment is such that CEOs are being prudent, said Yoel Zaoui, global co-head of M&A at Goldman Sachs Group.
Goldman Sachs is second to JPMorgan in advising on transactions this year. Morgan Stanley and Credit Suisse Group AG round out the top four. M&A advisers and private-equity executives will gather on Tuesday to discuss the outlook for dealmaking at the Bloomberg Dealmakers Summit in New York.
Deal volume sank alongside the outlook for the global economy. Spanish and Italian government bond yields increased to euro-era records during the quarter as Greece attempted to avoid default. In the US , credit concerns increased as Standard & Poors lowered the nations rating, saying lawmakers havent done enough to curb record budget deficits.
Timelines are being stretched, and whether these deals ultimately get done remains an open question, said Giuseppe Monarchi, head of M&A for Europe, the West Asia and Africa at Credit Suisse in London. PPR, the French owner of luxury brands such as Gucci, shelved plans this month to sell its Redcats online retail unit, partly because of the financing squeeze.