M&A activity up, but deal values drops

By Bryan Borzykowski | September 4, 2008 | Last updated on September 4, 2008
2 min read

The mergers and acquisitions market has had a tough go of things since the credit crunch sent the financial industry into a tailspin, and that didn’t change in Q2.

According to a new Crosbie & Company report, the M&A space saw the lowest level of aggregate deal value in almost five years, with transactions worth $18.5 billion. That’s $6.1 billion less than Q1 and just a fraction of Q2 2007’s total of $163.5 billion.

At the same time, the number of deals rose from 377 transactions in Q1 to 416 in Q2, though the industry is still short of the 552 deals made during the same period last year.

One reason for the drop in value is the relative lack of “mega-deals” in the quarter. Only two transactions were worth more than $1 billion. “Credit available for new large leveraged transactions evaporated in the quarter,” says Ed Giacomelli, managing director at Crosbie. “The dislocation in credit markets in Q1 and overhang related to previously announced mega-deals took a toll on leverage deals in Q2.”

Mid-market M&A fared the best in Q2, accounting for 74% of deal activity and nearly 70% of the deal value.

The largest announced transaction was Precision Drilling Trust’s $2.1 billion dollar bid for oil and gas driller Grey Wolf Inc.

As far as sectors go, oil & gas and industrial products had the best performance, accounting for 47% of the total transaction volume, and a value of $9.1 billion. Oil & gas specifically increased its deal volume by 43% over Q1.

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  • Canadian M&A stays strong, while IPOs falter

  • Credit woes have little impact on M&A

  • The financial sector saw an increase in activity last quarter with eight new announcements versus five in Q1. However, the deal value is worth only $3.6 billion, down from $5.1 billion last quarter.

    While other parts of the M&A industry didn’t fare well, cross-border activity was strong, with 169 transactions worth $12.6 billion. That accounts for 41% of all transaction volume and 69% of total M&A value. The seven largest transactions in Q2 were cross-border deals.

    Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com


    Bryan Borzykowski