1999 Third quarter M&A activity

Weekly Corporate Growth Report, Oct 18, 1999

Domestic M&A Activity

The number of announced U.S. M&A deals in the third quarter reached its lowest levels since the mid 1990's, while the dollar value was the lowest since the first quarter of 1998. In the U.S., 2,453 deals were announced with a total volume of $358 billion. Volume has decreased by 36.0% from 1999's second quarter when volume reached $504 billion.

Several factors have contributed to the third-quarter decline in domestic M&A activity. First, only 59 deals valued at $1 billion dollars or more were announced as compared to the 76 deals announced in the second quarter. Interest rate increases have also affected borrowing costs and are making transactions more expensive. Furthermore, the Financial Accounting Standard Board's anticipated decision to end pooling of interests has hindered the activity. Finally, the recent correction in equity prices has made it difficult for acquirers to create appealing offers. In the U.S., the business services industry had the most number of announced deals in the third quarter with 480. Prepackaged software was second with 180 deals, and real estate, including mortgage bankers and brokers, followed with 140. As for volume, the radio and television broadcasting industry led all industries in the third quarter with a total volume of $55 billion in announced deals. The power utilities industry was second with $33 billion, and the business services sector followed with $21 billion.

The largest domestic M&A transaction of the third quarter was Viacom's $40 billion merger with CBS Corp. The deal represented 12.0% of the quarter's total volume of announced U.S. deals. Global M&A Activity

While third quarter M&A activity declined in the U.S., it increased in Europe and abroad. Worldwide announced M&A volume reached $780 billion whereas the third quarter of 1998 only reached $535 billion as a result of international currency pressures and Russian political unrest.

Four of the five largest deals in the third quarter involved non-U.S. targets. Furthermore, only 42.0% of the quarter's announced deal volume was generated by U.S. targets as compared to the 48.0% derived from Europe.

The banking industry led international M&A activity with $67 billion in announced deal volume. Oil and gas was second with $66 billion, and telecommunications followed with $49.5 billion. For the number of announced international deals, the business industry was first with 550. Investment and commodity firms followed with 280 deals, and real estate completed the top three with 250 transactions.

The largest announced M&A deal for the quarter was French Total Fina's $49.7 billion acquisition of Elf Aquitaine. (Source: Thomson Financial Securities Data)