Global mergers and acquisitions slumped this quarter to a level not seen since the aftermath of the financial crisis amid increasing concern the economic recovery is deteriorating.
Companies have announced $446 billion of takeovers since June 30, the smallest amount since the third quarter of 2009, according to data compiled by Bloomberg. Acquisitions are now on pace to drop 15 percent in 2012 to $2 trillion, the lowest in three years.
Cross-border takeovers have accounted for about half of announced deals this year, which may continue with European Aeronautic Defence and Space Co. in talks to combine with BAE Systems.
Still, while chief executive officers worldwide are sitting on at least $3.4 trillion in cash, many remain reluctant to pursue deals as Europe’s sovereign-debt crisis drags on and signs grow that China’s economy is slowing.
Executives have the cash, but they don’t have the conviction, said Andrew Bednar, head of advisory at Perella Weinberg Partners in New York. I don’t see any miraculous change in the M&A markets for the foreseeable future.
This quarter’s slowdown has been most pronounced in Europe, where takeovers accounted for about $92 billion, or 21 percent, of global activity, the continent’s lowest share since 2010.
The deals getting done are notable for cross-border cooperation. More than $720 billion in takeovers this year involve companies in more than one country, the highest share in five years, data compiled by Bloomberg show.
That includes Chinese state-run oil company Cnooc Ltd.’s purchase of Canada’s Nexen Inc. and Belgium-based Anheuser-Busch Inbev’s $20.1 billion buyout of the shares of Mexico’s Grupo Modelo SAB that it didn’t already own.
EADS, based in Toulouse, France, and London-based BAE said this month they are in talks on a transaction that would potentially create the largest European aerospace and defense company.
What’s remarkable about this year is the size of the cross-border transactions we’re seeing, said Michael Carr, head of Americas M&A at Goldman Sachs. They’re notable in a market that’s characterized by caution.
There are fewer deals to fight over this year, partly because of Europe’s extended sovereign-debt woes. The crisis has forced leaders to implement aid packages in Greece, Ireland and Portugal to help preserve the 17-nation euro zone, with the euro area bound for recession.