Global M&A Activity Reaches 4-Year High In Q4 2012; More To Come In 2013

by Trefis Team
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This year has officially been the worst since the economic downturn of 2008 in terms of global merger & acquisition (M&A) activity. Companies around the globe announced deals totaling $2.19 billion over the year – a good 10% below the figure for 2008. [1] But there is a silver lining here. While the M&A figures for the first three quarters of the year were dismal, deals worth $691.9 billion were announced worldwide in the last quarter – almost a third of the total deals for the year. This figure is the highest for a quarter since Q3 2008 and is only expected to grow over coming quarters.

Needless to say, the cash registers at investment banks are ringing again as increased M&A activity brings in fees at levels unseen for quite a while now. Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and all the other usual suspects seen at the top of the list of global M&A advisers can also hope to report better returns from their advisory business in the times to come.

See our full analysis for Goldman Sachs Morgan StanleyJPMorgan

Since the economic downturn of 2008, companies have been extremely careful about what they do with their cash – preferring to shore up their balance sheet to better brace themselves in case of adverse circumstances than use the capital to grow inorganically. This becomes evident from a single glance at the chart above which represents the total size of completed M&A deals each year, as reported by Thomson Reuters Deals Intelligence. [2]

But a recent report shows a notable improvement in the situation for Q4 2012, with global M&A volumes reaching their highest level in four years. This marks a change in the corporate psyche over the period since the recession to finally look at big-ticket acquisition options. And as more companies explore M&A opportunities they shelved due to the recession and the continuing slowdown, it only means more business for the investment banks.

Goldman continues to rule the roost, ranking first among global investment banks by its involvement in more than a quarter of the M&A deals announced over the year. [1] You can make changes to the chart below to understand how an increase in Goldman’s share of the global M&A market impacts its share price.

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Notes:
  1. Fourth-Quarter M&A Surge Spurs Optimism After 2012 Deals Decline, Bloomberg, Dec 27 2012 [] []
  2. Quarterly Reviews, Thomson Reuters DMI []
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