LOS ANGELES, Dec. 31, 2002 (PRIMEZONE) -- For the M&A market, there will be grim satisfaction in closing the door on 2002. Though, by historical accounts, it wasn't such a bad year. When the dust settles, total announcements by U.S. dealmakers in 2002 will clock in at about 7,387 transactions, making it the sixth best year since 1962, when Mergerstat first began tracking M&A activity.
Still, markets have short-term memories and this year's activity fell well short of the 8,545 transactions announced in 2001 and the 11,123 transactions announced in record-breaking 2000. Disclosed dollar value on transactions also saw a sharp decline this year compared to that of recent years--$441.3 billion in 2002 versus $683.0 billion in 2001. Blame it on the dearth of big deals. In 2002, dealmakers reported just 68 deals worth more than $1.0 billion, compared to 119 in 2001. The overall value of these deals was $223.5 billion in 2002 compared to $401.2 billion in 2001.
As a whole, Europe fared a little better in the M&A space than the U.S. in terms of total deal announcements. European dealmakers recorded about 7,704 transactions in 2002, yet like their U.S. counterparts their activity numbers paled in comparison to 2001, in which they announced 8,871 transactions. They also reported lower values on transactions like dealmakers in the U.S. did. For the year, total disclosed deal value for the region fell to $417.7 billion in 2002 from $676.4 billion in 2001. Although there were about the same number of deals worth $1.0 billion or more--81 in 2002 compared to 82 in 2001--the deal value on those deals tended to be much smaller--$216.7 billion in 2002 versus $465.6 billion in 2001.
Clearly, like the Western economies, the hoped-for rebound that M&A observers kept predicting all year long never quite materialized. Many strategic and financial buyers remained on the sidelines, awaiting some positive news and searching for ways to fund a deal, given a downtrodden stock market and an uptight credit environment. Long gone were the days when stock was used almost as frequently as cash to pay for a purchase; cash was by far the payment of choice in 2002. And caution was the watchword. Tolerance for bad deals was at a low this year and acquirers were forced to perform far greater due diligence on their transactions than in the past, which helps explains why together in Europe and the U.S., the number of private company agreements, the main engine of M&A activity, fell by 18.5 percent, the number of public company deals dropped by 24.9 percent, and the number of unit divestitures slowed by 8.1 percent in 2002.
Yet there was and continues to be a bright spot in the gloomy numbers of this year, which bodes well for the M&A market in 2003: The large-scale emergence of private equity buyers in the second half of 2002. These financial acquirers, a powerful group with a massive amount of capital at their disposal, were one of the few in M&A Land that actually boosted deal activity higher than the level of 2001. They accounted for more deals than any other group, roughly 11.0 percent of the total M&A market. Moreover, they were responsible for some of the year' biggest and most interesting deals. Think Burger King, the sale of Quest Communications' publishing business, Northrup Grumman's divestiture of TRW Automotive. In fact, the recent wheeling-and-dealings of such vaunted, value-oriented private investors as Bain Capital, Texas Pacific Group, KKR, Hicks Muse, Welsh Carson Anderson & Stowe, The Carlyle Group, and Blackstone Group, to name a few, have prompted some M&A players and observers to call a market bottom-and to suggest that perhaps better times for dealmakers lay ahead in the near future.
To find out more about the M&A landscape in 2002 and 2003, visit the Mergerstat Website at www.mergerstat.com. Complete coverage of M&A statistics can be found in Mergerstat's M&A publications, Corporate Acquisitions and Mergerstat eMonthly. For more information call 1-800-455-8871 or email: info@mergerstat.com.
-- The data in this release was complete as of December 30, 2002.
Mergerstat LP tracks mergers and acquisitions involving U.S. and European business entities excluding the exchange of business assets, private placements, spin-offs and open-market transactions. Mergerstat offers its research and analysis electronically through Alacra, Lexis Nexis, Standard & Poor's, Shannon Pratt's BV Resources, FactSet, and Capital IQ.