Markets

M&A 2011 Activity: An Overview

31 Jan, 2012 11:09

Merger and acquisition (M&A) activity in 2011 did not live up to the optimistic expectations that were set at the start of the year. Overall, total M&A volume in 2011 remained fairly flat with $2.27 trillion compared to 2010’s $2.19 trillion. A major source of the lag was in Q4, as shown in the graph below:

In summary, North America accounted for 48% of global M&A volume, followed by Western Europe, which despite the prevalent debt crises, managed to generate a 3 year high of $540 billion dollars in M&A activity, according to Bloomberg’s 2011 Annual Mergers & Acquisitions Legal Advisory Ranking. Asia Pacific remained flat compared to 2010 with a sharp decline in Q4 activity.

It seems that the optimism was doused with the harsh reality of slow economic conditions in the US, and with the crises developing in Europe. According to a survey of financial market professionals, limited economic growth coupled with concerns over sovereign debt represented the biggest obstacles to deal flow, and experts say it may take at least 2 years for Global mergers and acquisitions to return to the record pace of 2007, which had $4.4 trillion in volume.

However, hope remains for the 2012 M&A outlook; US banks’ direct exposure to European sovereign debt is manageable, and the concerns over indirect exposure seem to be easing with finance ministers taking the necessary steps to lower interest rates and implement structural reforms. US investors will begin to be more optimistic as the collapse of the Eurozone seems less likely. A mix of positive news from Europe and resilient growth projections for the US economy will foster an environment that incentivizes corporations to utilize their currently huge cash reserves for new investments. Considering the so far optimistic start to the New Year, 2012 may shape out to be very good for M&A activity