Banking giants hit by M&A collapse

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The Independent Online

Investment bankers working on mergers and acquisitions, must be hoping the restructurings and forced disposals anticipated next year come on tap soon after a one-third fall in M&A in 2008.

Preliminary numbers from data consultancy firm Dealogic showed global M&A tumbled by 29 per cent in 2008 taking deals to a combined value of $3.3trillion. Banks refusing to lend to private equity firms and companies scared to take big steps amid market volatility were the main reasons for the fall.

What little M&A took place was often government-instigated as the financial meltdown took hold and countries worldwide forced struggling lenders like Bear Stearns, Merrill Lynch and HBOS into the hands of stronger rivals. This helped make financial services the most active sector worldwide for deals, accounting for about a fifth of all deals.

US banking giant JP Morgan, which bought Bear Stearns, led the global M&A advisory rankings, toppling rival Goldman Sachs, which is still smarting from last week announcing its first quarterly loss since listing in 1999. Goldman however still led the pack for US-based M&A advice.

The year was also notable for having seen $919bn of pulled deals. These included miner BHP Billiton's $148 bn aborted bid for rival Rio Tinto, abandoned as the commodity market crashed, as well as the $48.5bn acquisition of Canada's BCE by a trio of private equity firms. Private equity buyouts fell by a spectacular 71 per cent globally, the figures show.

Elsewhere, executives' fear of issuing equity in turbulent markets contributed to a fall in IPO volumes to their lowest since 2003. And only distressed financial institutions and their frequent emergency cash calls kept share issuance even that high. Banks made up 40 percent of the $83bn raised through share placings.