International M&A volumes decreased by 14% in the final quarter of 2011 compared to Q3 2011 and were down 18% compared to Q4 2010, according to the Ernst & Young M&A Tracker, released December 23rd.
Globally deal values were down 25% in the quarter, and are now at their lowest level since Q1 2010.
The M&A Tracker is compiled by Ernst & Young and the M&A Research Centre (MARC) at Cass Business School from six different transaction data sources. Quarterly M&A activity levels recorded in Bloomberg, CapitalIQ, Dealogic, Mergermarket, Thomson and Zephyr are consolidated and compared to activity levels in Q1 2010 using a proprietary weighted-average methodology.
As uncertainty about global growth continues to discourage the appetite for risk, Q4 2011 saw a sharp drop in cross-border activity to 30% of all global transactions. The last three quarters of the year have also had historically high proportion of cash only deals reflecting depressed share prices which make stock-financing an unattractive option for bidders.
Automotive was the only sector that saw deal volumes and deal value increase in the quarter although Media & Entertainment, Mining & Metals, Oil & Gas and Power & Utilities all saw a rise in deal value from Q3. Among the worst hit sectors by value of M&A were Asset Management, Banking, Consumer Products and Telecoms who all saw falls of more than 40%.
All parts of the world saw a decline in activity in Q4 compared to Q3 although the fall was more muted by volume in Asia and the Middle East. The biggest fallers by deal value were Central and Eastern Europe and Oceania – both declined more than 50%. Western European M&A continued to drop against the background of the Eurozone crisis. Volumes were down 18% and value 22%, both larger falls than in North America (14% and 21% declines respectively).
Dave Murray, Transaction Advisory Services Markets Leader at Ernst & Young, says: 'The decrease in the volume and values of deals globally was primarily driven by continued uncertainty caused by the Eurozone crisis and the knock on effect to the global economy'.
Outlook for 2012
Dave continues: 'If the Eurozone leadership can secure a credible funding solution I expect a period of stability will allow deal making to recover'.