In This Article
- Exhibit 1: The slow-down in M&A over the last few months of 2007 was concentrated largely in the private-equity sector.
- Exhibit 2: M&A deals continued to generate strong value in 2007.
- Exhibit 3: The acquirers’ share of the overall value created by deals has improved somewhat.
- Exhibit 4: The levels of value created by deals in different sectors and geographies continue to diverge significantly.
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Are reports of the demise of M&A activity premature? Announced mergers reached $4.4 trillion globally in the first 11 months of 2007, and record volumes from January to July had already surpassed the record full-year level, set in 2006. But midyear, as the subprime-lending crisis began to rage, merger activity plunged about 40 percent from the second to the third quarter.
Although the dive generated much commentary that the M&A boom had ended, a more subtle analysis suggests a different conclusion for deal makers: the slowdown over the last few months of 2007 was concentrated largely in the private-equity sector. Corporate M&A lost none of its vigor as the year rolled on. Furthermore, our annual review of M&A activity finds that acquiring shareholders still appear to be getting more value from deals than they did during the last M&A upswing, in the late 1990s. Acquirers still have considerable room for improvement, but their newfound discipline appears to be keeping bid premiums under control and sustaining improvements in the flow of value to the acquirer.
Private-equity deals were another story: in the second half of the year, their volume fell by over 50 percent (Exhibit 1), hit by turbulence in the...