2011 deal activity, Christmas and the New Year – all gone in the blink of an eye

Happy New Year to you all and off we go again into another year. No sooner have we left Christmas and the New Year behind us, we all start to look to the year ahead with our New Year’s resolutions written down and hopefully not broken just yet. And it’s just the same in M&A deal terms.

2011 is now history to the bankers and professional advisors who worked many hours and long days on last year’s deals. Yes, there will be deals that have not yet been completed and are lingering on like turkey leftovers after Christmas day, but already thoughts will have turned to the 2012 deal pipeline.

I think it’s fair to say that 2011 wasn’t a vintage year in terms of global M&A deal activity; deal numbers fell for the second consecutive year and deal value also declined by 4.2% on 2010 levels.

However, there were some pretty sizable deals taking place with 2011 seeing the announcement of 22 deals that were over $10bn each in terms of deal value. Whilst this number is less than half of the number of $10bn+ deals experienced in the frenzied days of 2007, it is an improvement of 22% on the number of deals that were over $10bn in value during 2010.

Interestingly, given the supposedly flat state of the US economy, half of these 22 deals were US domestic deals – proving that the largest US-based companies have been willing to spend the cash on their balance sheets if the opportunity and price has been right.

Whilst eurozone worries seemed to be ever present throughout 2011, they didn’t appear to affect full-year deal activity involving Western European companies. 2011 saw both deal value and deal volume increase on 2010 levels by 6.25 and 6.91% respectively. And not surprisingly the most active buyers by deal value of these Western European companies originated from the US – again demonstrating a willingness of US companies to spend hard earned cash when the prices are right and duly take advantage of the strengthening dollar against the weakening euro.

Activity in Asia was disappointingly lower than in 2010, however, given the earthquake in Japan and the flattening out of China’s economic growth, two of Asia’s traditional deal powerhouses saw activities lower than that experienced in 2010 for very different reasons.

So what will 2012 bring – it’s hard to predict. Europe is still battling with eurozone currency issues, the US has an election this year and still no signs of real economic growth. And what about Asia? On the surface many of the Asian economies remain buoyant, but the new great hope in terms of deals that appeared to be China and other emerging Asian economies doesn’t seem on paper to have happened.

Still, looking on the bright side, at least you can already buy your Easter eggs in advance of Q1 2012 deal activity figures!