While June has long been considered the wedding month, December may soon overtake it. Or at least one would think so from the level of merger and acquisition activity that's been recorded so far this month. Companies seem to want to get together in far greater numbers lately, after having taken a summer hiatus when the credit crunch roiled the markets.
According to Dealogic, Dec. 17 embodied the return of "Merger Monday," the day when lots of deals are announced; it was the busiest Monday since the end of July for deals. That's when we saw the likes of National Oilwell Varco's (NYSE:NOV) $7.4 billion play for Grant Prideco (NYSE:GRP), and Ingersoll-Rand's (NYSE:IR) $10 billion bid for Trane hit the wires. For the year, Thomson Financial says U.S. merger volume hit a record $1.57 trillion, while worldwide, the numbers are up 21% over 2006 (previously the busiest year on record). In fact, that milestone was passed back in September, when some $3.6 trillion in deals were consummated.
Yet despite the December revival, the numbers may mask the fact that the number of U.S. deals has been falling at an even faster pace than international deals. According to Thomson, domestic deal volume has been down precipitously since September and fell 73% in November alone. Global merger activity is down 27%, but activity is off 46% here in the U.S. in the second half of the year.
Moreover, morbidity may have been forestalled only because of a handful of high-priced deals -- for example, the second mother of all mergers, BHP Billiton's (NYSE:BHP) bid for Rio Tinto (NYSE:RTP), which was valued at about $149.2 billion. That alone accounted for one-third of worldwide volume last quarter.
Missing in recent weeks has been private equity, the entity that fueled much of the spending spree in the first half of the year. It fell from as much as 41% of U.S. merger volume at the beginning of July to just 15% in the back half of the year.
While foreign investment to bolster some big financial names has grabbed a few headlines recently, the cheap dollar may actually make such headlines more commonplace next year. Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), and UBS have all received an infusion lately to prop up their positions. We may very well see deal-hungry overseas investors picking amongst the scraps of beaten-down stocks here and buying them outright.
Credit is still tight, and private equity is still feeling the effects of its nuclear winter, making it leery of taking on new business. Although tradition says "When December snows fall fast, marry and your love will last," it could still be a pretty bleak outlook for brides-to-be seeking the bliss of corporate matrimony.
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