The global M&A market, which
was flying high in the last couple
of years, has slowed down since the fall of the US investment
bank Lehman Brothers. As the crisis deepened, corporate deal-making
became increasingly difficult. This is reflected in the drastic drop in the number
of value deals that have been done recently. According to the global
deal tracking firm Dealogic, global M&A activity declined through the second half
of 2008 and is continuing to decline in 2009 as well. Since the beginning of 2009,
global M&A volume has come down by 42% and the number of completed deals
is down by 34%, compared to the 2008 data for the same period.
Though the global financial crisis has a limiting effect on the global
M&A activity, analysts say that it has not stopped totally. They say deals are
happening across the globe, but with a difference. The credit crunch and
equity markets slowdown have put a brake to the much preferred private-equity
and debt financed mega deals, and are paving way for strategic and all cash
deals. So far, M&A activity in 2009 has revealed an interesting mix of buyers
and sellers who remain motivated by strategic bargains in this distressed
environment. They are on the lookout for deals that truly fit their
organizational goals and help them stave off the
crisis' effects and survive rather than orienting on growth. Most of the
deals in the current environment are characterized by
high-cost savings and low gearing, unlike high gearing and
low-cost savings during the boom periods. In this
backdrop, analysts opine that strategic deals would find more prominence over the
financial deals for the next couple of years.
However, managing and completing these kinds of deals have their own
challenges.
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