Mergers and Acquisitions `Frozen' Amid Credit Market Turmoil By Ambereen Choudhury and Elisa Martinuzzi
Oct. 2 (Bloomberg) -- The pace of mergers and acquisitions declined 28 percent this year as the credit crisis checked companies' ability to fund deals, and the U.S. and European economies teetered on the brink of recession. Companies announced takeovers valued at $2.37 trillion in the first nine months of the year, down from the record $3.29 trillion in the year-earlier period, according to data compiled by Bloomberg. The value of U.S. mergers dropped 35 percent, while dealmaking in Europe and the Middle East declined 28 percent, the data show. Only takeovers in Asia, excluding Japan, increased, showing an 11 percent gain. The collapse of the U.S. subprime mortgage market has roiled credit markets globally, leaving companies unable to get funding from banks to finance deals. In the past month, firms from Lehman Brothers Holdings Inc. to Washington Mutual Inc. have failed, spurring the U.S. Senate to pass a $700 billion financial-market rescue package last night to avert a recession. ``The M&A market is all but frozen while politicians around the world grapple with the economic crisis,'' said Simon Collins, head of corporate finance at KPMG. ``With the debt market virtually inaccessible, deal paralysis has also spread into sectors such as energy, which were until recently considered resilient to the world's economic woes.'' Xstrata Plc scrapped its 5 billion-pound ($8.8 billion) hostile bid for Lonmin Plc, the world's third-largest platinum producer on Oct. 1, blaming ``extreme'' turmoil in financial markets and concern over financing for the deal for the collapse. `Keen To Do Deals' Fortis, bailed out by the governments of Belgium, the Netherlands and Luxembourg, scrapped the 2.15 billion-euro ($3 billion) sale of half its asset management arm, citing the credit crisis. ``There are plenty of people keen to do deals,'' said John Tattersall, a partner at PricewaterhouseCoopers LLP in London. ``But acquisitions need bank funding in many cases, or share prices that are higher.'' Banks and insurers have booked more than $588 billion in losses and writedowns since the global credit crisis began about 13 months ago. That's forced them to merge with competitors or sell shares, cushioning a bigger fall in deal-making. Bank of America Corp.'s $40.4 billion takeover of Merrill Lynch & Co. and Lloyds TSB Group Plc's $23.5 billion purchase of British mortgage lender HBOS Plc lead $169 billion of deals in the industry in September alone. Banks also make up almost half of the money raised in share sales this year, Bloomberg data show. IPOs Decline The decline in stock markets this year has made it less lucrative for companies to sell shares in initial public offerings. Stock offerings fell 28 percent to $398.5 billion in the first nine months of the year, Bloomberg data show. The MSCI World Index has dropped 25 percent in the same period, its first decline in six years. IPOs fell more than half in the period to $84.7 billion. Companies from Salvatore Ferragamo SpA, the Italian maker of luxury shoes once worn by Greta Garbo and Marilyn Monroe, and Poland's Enea SA, a state- owned power group, have delayed IPOs until markets improve. ``Last time we had a similar decline in IPO business it was in 2001, and it took two years to recover,'' said Gil Forer, global director of IPO initiatives at Ernst & Young LLP in London. ``The uncertainty and instability in the market make it difficult for companies'' to sell stock. The U.S. Senate passed the rescue package yesterday. The bill's supporters cited the record 778-point drop in the Dow Jones Industrial Average after the House of Representatives' 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. ``My gut feel is that dealflow will turn up in first quarter next year,'' Tattersall said. ``But when and by how much depends on rebuilding confidence.'' To contact the reporters on this story: Ambereen Choudhury in London at [EMAIL PROTECTED]; Elisa Martinuzzi in Milan at [EMAIL PROTECTED] --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
