M&A Market Took It on the Chin in Q3

Data provider Dealogic reported Thursday that LBO and M&A activity fell off sharply in Q3 during a global credit crunch, although mid-market deals held up relatively well. Deals valued in the $100 million-1 billion range totaled nearly $82 billion in the quarter, a 15% drop from a record Q2. Deals above $1 billion, however, tanked 57% from Q2, dropping to $214.3 billion from $495.3 billion. American LBOs sank from $67.2 billion in July to $7.1 billion in August and $11.4 billion so far in September. "The mega-deal markets are still locked up with this huge backlog of deals that didn't get done," said Michael Hogan, a managing director at middle market merger advisory firm Harris Williams. "But if you are in a size where the deals could be clubbed from a group of lenders...all those groups are still providing financing and the deals are getting done." Overall M&A volume in the U.S. was $308.7 billion in Q3 -- down from $606.5 billion in Q2, but up 13% from Q3 2006. For the first three quarters, U.S. M&A reached $1.34 trillion, up 27% over the year-ago quarter. Globally, the M&A market hit a record $3.85 trillion over the first three quarters. Global deal volume in Q3 fell 42% to $1 trillion from $1.74 trillion. Goldman Sachs is the top-ranked U.S. M&A advisor, followed by Morgan Stanley, Citigroup, Lehman Brothers, JPMorgan and Merrill Lynch.

Sources: Financial Times, Business Week, Reuters, Alphaville
Commentary: Three Reasons To Refrain From Buying Investment Banks • Goldman, KKR Abandon Harman Buyout • Opportunistic Short Opportunities In Financials
Stocks/ETFs to watch: GS, MS, C, LEH, JPM, MER. ETFs: IAI, XGC, FDL
Earnings call transcript: Goldman Sachs F3Q07, Morgan Stanley F3Q07, Citigroup Q2 2007, Lehman Brothers F3Q07, JPMorgan Chase Q2 2007, Merrill Lynch Q2 2007

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