Deal value slumps as credit crunch hits -- data
NEW YORK, March 27 (Reuters) - The value of deals struck in the United States slumped 56 percent to $195.8 billion in the first three months of this year as the credit crunch thwarted buyers' ability to finance transactions, Dealogic said on Thursday.
Globally M&A value in the first quarter fell 41 percent to $652.6 billion, the lowest since the third quarter of 2005, according to data from the research firm.
The number of deals also slowed from the previous quarter to 8,413 deals globally, a 16 percent drop from activity in the fourth quarter, Dealogic said. The preliminary results include first quarter data through March 25.
The credit crunch and looming recession are to blame, said Marshall Sonenshine, chairman of New York investment banking boutique Sonenshine Partners.
"You are seeing a pullback by buyers and a mismatch between buyers and sellers," Sonenshine said. "We appear to be in the early stages of a potential recession and therefore you have the classic problem of buyers being nervous."
While deal volume in the United States fell overall, the number of "strategic" -- meaning companies in the same industry buying each other as opposed to a leveraged buyout -- increased 19 percent.
"Given the lack of private equity activity, I believe the strategic buyers are coming back into the M&A marketplace," said Morton Pierce, chairman of Dewey & LeBoeuf's mergers and acquisitions group. "I think you are going to see that continue."
But deal volume has also fallen in financial services industry, where deals have historically been strategic, said Brian Sterling, co-head of investment banking at Sandler O'Neill & Partners.
"The financial services industry has been leading the market on the downward trend," Sterling said. "You have got deep questions about the strength of a number of participants in the industry."
In the United States, the average deal size fell to $256 million during the quarter from $611 million last year, Dealogic said.
"In my experience financial deals just tend to be larger than strategic deals," said Wesley Fredericks, a partner at law firm Heller Ehrman. "There is a point under which a financial buyer doesn't find it worthwhile to go through the whole process, whereas with a strategic buyer, they'll acquire whatever they perceive they need for their particular enterprise."
Dealogic said Microsoft Corp's (MSFT.O) $44.6 billion bid to acquire Yahoo Inc (YHOO.O) was the largest U.S. deal announced in the first quarter.
In February, Dealogic had said Microsoft hired Morgan Stanley (MS.N) and Blackstone Group LP (BX.N), while Yahoo hired Goldman Sachs Group Inc (GS.N) and Lehman Brothers Holdings Inc LEH.N as advisers.
Goldman Sachs led the global advisory rankings in the first quarter with $117 billion, ahead of Morgan Stanley at $94.3 billion and Lehman Brothers at $93.3 billion. The same three advisors topped the U.S. ranking, while JPMorgan Chase & Co (JPM.N) topped the European M&A ranking and UBS AG (UBSN.VX) led the table in the Asia-Pacific region, excluding Japan.
Advisory revenue fell 35 percent to $3.9 billion. Goldman Sachs led the M&A ranking for revenue earned with $392 million, Dealogic said.
"The largest lead players in M&A may change positions among themselves, but they don't often change positions with smaller players," Sonenshine added. (Editing by Andre Grenon)
