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Study Finds M&A Slump Continued in First Half

Value of deals decline less than their number, according to Mergermarket.

Global mergers and acquisitions activity fell as the global downturn worsened in the first half of 2009.

Data compiled by the research firm Mergermarket showed total deal volume was down 47.4 percent to 3,800 transactions, compared with the year-ago period, and the value of M&A activity dropped 43.6 percent to $705.7 billion.

Deal volume decreased 51.6 percent from the peak of 7,880 transactions during the first half of 2007, as total value fell 66 percent from almost $2 trillion. On a quarter-to-quarter basis, deal volumes have remained steady through 2009, suggesting the number of M&A transactions may have bottomed out, Mergermarket said.

Consumer category deals, including those for retailers, accounted for 14.4 percent of transactions during the first half, but only 5.6 percent based on value.

The biggest slump was in the upper end of the midmarket level, or deals between $250 million and $500 million. In that category, total global deal volume was down 64.6 percent from the first half of last year, as the total global value of the transactions fell 67 percent. European activity levels in the midmarket tier were particularly low, with decreases of 67.4 percent in volume and 70.2 percent in value.

Large-cap deals of more than $500 million fell 52.2 percent by volume activity and were down 38.7 percent by transactional value. While the U.S. recorded a 9.6 percent slip in large-cap transactions by value, six of the 10 largest deals involved U.S. targets. The biggest was in January 2009, involving Pfizer’s acquisition of Wyeth at $64 billion, according to Mergermarket.

At the lower midmarket tier, deals between $10 million and $250 million accounted for an average of 47.4 percent of North American M&A activity and 41.8 percent of European transactions from 2003 to 2007, compared with 37.1 percent and 34.9 percent, respectively, from 2008 to the first half of 2009. This segment continues to account for more than 55 percent of overall M&A activity in the Asia-Pacific region.

Large private equity deal flow remains nonexistent in 2009.

Mergermarket also noted an increase in insolvency transactions. A total of 223 insolvency transactions have been announced globally for the first half of 2009, with just over half, or 112, in the second quarter. That’s 27.3 percent higher than the last peak of 88 deals in the second quarter of 2004.