Global mergers and acquisitions (M&A) plunged by a third in the first quarter to $444 billion, as the financial crisis thwarted deal making and all but silenced the private equity houses behind many boom-era takeovers.
Announced M&A had its slowest first quarter in six years, according to Thomson Reuters data released today.
That was despite several bank bailouts, and two US drug industry tie-ups together worth $110 billion -- or a quarter of all deals by dollar value.
Bankers said the tough conditions would endure until credit markets became more welcoming, shares stabilised, and the economic picture brightened, allowing acquirers to forecast earnings with more certainty.
The two biggest deals, Pfizer's $64.5 billion purchase of Wyeth and Merck's $45.9 billion move on Schering Plough, gave healthcare its busiest quarter in a decade, although bankers doubt more mega-mergers will follow.
The financial services sector was also busy, with the British Treasury's $22.3 billion bailout of Lloyds Banking Group the quarter's third-biggest single deal.
Support for Royal Bank of Scotland, which the data accounts for in several tranches, made up another four of the top ten deals, worth a combined $47.8 billion.
Roles advising Wyeth, Schering Plough, and RBS helped Morgan Stanley elbow aside arch-rival Goldman Sachs to claim top spot for worldwide M&A, advising on $216.7 billion of deals. Goldman fell to fourth place.
The turnaround is a small coup for Morgan Stanley, which from 2005 to 2007 ranked second behind its Wall Street rival for full-year M&A, before slipping to fifth place in 2008.
The data highlighted the wrenching transformation that investment banking and other parts of the financial system are undergoing.
Private equity firms -- which three years ago accounted for a fifth of all deals but are now starved of the leverage that fuelled big buyouts -- undertook just $9 billion of deals, or 2 per cent of the quarter's total.
In M&A, fees for completed transactions sunk 68 per cent to $3 billion. Across the wider investment banking industry, which also includes loans and debt and equity capital markets, fees halved to $10 billion, marking the weakest quarter since 1998.
Still, some bankers found reasons for optimism, such as the record $311 billion of corporate bonds issued, including $30 billion-plus of bonds sold by Roche to finance its buyout of Genentech.
Reuters