M&A activity slips to seven-year low as bear markets bite

The number of deals struck in the first three months of the year sank to its lowest level in seven years, with the total value of announced transactions falling almost 50 per cent from the same period in 2001.

The number of deals struck in the first three months of the year sank to its lowest level in seven years, with the total value of announced transactions falling almost 50 per cent from the same period in 2001.

Dealogic, the capital markets research agency, said the number of deals announced worldwide fell 25 per cent year-on-year in the first quarter to 5,064, totalling $261bn (£180bn) in value. Deal volume in the US was down 57 per cent, and in Europe by 34 per cent.

The proportion of deals that were disposals rose from 33 per cent to 50 per cent as companies concentrated on core operations and raised funds to clear debt amid continued economic uncertainty.

There was also a sharp decline in the number of deals at the top end of the market, with only one deal in the first quarter exceeding $10bn in value. Overall average deal size fell from $145m in the first quarter of 2001 to $99m. Telecoms was among the worst-hit sectors, while media and software was the most active.

The US investment bank Credit Suisse First Boston topped the global league in terms of both volume and aggregate size of deals, followed by Merrill Lynch and Goldman Sachs. Goldman Sachs came on top in the US, while Merrill Lynch took the crown in Europe.

In the UK, Deutsche Bank pulled off the aggregate highest value of deals, at £12.3bn, even though it announced about half as many transactions as runner-up Morgan Stanley.

While deals announced in March accounted for almost half of the quarter's dealflow, many bankers remain cautious. "It is not our view that [March] heralds a new dawn for the mergers and acquisitions market," said Nick Draper, chairman of European M&A at JP Morgan. "In our judgement, activity will be down on last year and there is no reason to believe that the second half will be substantially stronger than the first."

The global economic slowdown, combined with weak and volatile equity markets have seen investment banks shed thousands of staff over the last 12 months, with further cuts expected this year.