December 23, 2008 / 6:40 AM / 11 years ago

Record deal cancellations slammed banks in 2008

NEW YORK (Reuters) - Most investment bankers would like to forget about the disastrous year that was 2008 — even as they think about the fees that could have been.

The JP Morgan and Chase headquarters is seen in New York in this January 30, 2008 file photo. More than 1,100 deals were canceled during the year, up from just under 800 in 2007, according to Thomson Reuters data. JPMorgan Chase & Co, which took the second spot in the worldwide M&A rankings for 2008, lost the most fees from canceled deals during the year. REUTERS/Shannon Stapleton

More deals were withdrawn in 2008 than ever before, and with overall mergers and acquisition activity down 35 percent around the world, you can bet bankers would like those deals back.

Over 1,100 deals were canceled during the year, up from just under 800 in 2007, according to Thomson Reuters data.

The total value of withdrawn deals for 2008 was nearly $800 billion, and banks lost more than $815 million in fees. Some of the notable ones included BHP Billiton Ltd’s (BHP.AX) $188 billion offer for Rio Tinto Plc (RIO.L); the proposed buyout of Canadian telecommunications giant BCE Inc (BCE.TO) by a group of private equity firms; and Microsoft Corp’s (MSFT.O) unsolicited bid for Yahoo Inc YHOO.O.

And who were the biggest losers from all the nixed transactions?

The biggest winners overall, as it turns out.

JPMorgan Chase & Co (JPM.N), which took the second spot in the worldwide M&A rankings for 2008, lost the most fees from canceled deals during the year. Thomson Reuters estimated that withdrawn deals that the bank was working on could have brought in $72.6 million in fees.

Goldman Sachs Group Inc (GS.N), which topped the worldwide M&A rankings, took second place for withdrawn M&A, losing out on an estimate $63.7 million.

Morgan Stanley (MS.N), Citigroup Inc (C.N) and Lazard Ltd (LAZ.N) rounded out the top 5 for lost fees from withdrawn deals.

While the record level of failed deals hurt in 2008, James Stynes, global chairman of mergers and acquisitions at Deutsche Bank Securities, said things can only get better next year.

“What drove the cancellations was unexpectedly dramatic gyrations in various markets — credit markets, stock markets. That has already happened,” Stynes said.

“People will strike deals with the knowledge that credit is extraordinarily scarce and the market is very volatile. They will anticipate that, and therefore deals that get struck are more likely to be structured in a way that they take these issues into account,” he said.

Additional reporting by Jui Chakravorty; editing by Jeffrey Benkoe

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