Global merger & acquisition meltdown

The global market for mergers and acquisitions remained depressed during the first half of 2008.

M&A volume dropped 36 percent to $1.6 trillion, compared with the record-breaking first half of 2007. Much of the volume was concentrated in the second quarter.

In the United States, deal volume tumbled 40 percent in the first half of the year.

Private equity firms, a driver of the M&A boom that peaked last year, stayed on the sidelines as turmoil in the global credit markets continued to weigh on deal volume. Financial sponsor-backed transactions totaled just $152.4 billion, the lowest level since 2005.

"With little financing opportunities available for private equity firms to make acquisitions, not one leveraged buyout over $5 billion has been announced since July 2007," Thomson Financial analysts say in a report.

Mergermarket, an independent M&A information service, says the state of the M&A market was best illustrated by the response to General Electric's announcement in May that it would put its appliances business up for sale.

"Had this sale process been announced just one year ago, private equity firms would have dominated the auction process," Mergermarket writes, noting the principal parties are instead strategic international buyers.

Thomson Financial says cross-border deal activity, which represented 40 percent of global M&A volume, was "aided by emerging economies with cash to spend and favorable exchange rates in the U.S."

Broken down by industry, Mergermarket analysts say energy and commodities, which remained a major M&A sector in 2008, is showing signs of plateauing. "The more consistent sectors of activity going forward comprise industrials as well as the consumer sector," the analysts write.

Mergermarket says JPMorgan, bolstered by Bear Stearns' deal pipeline, was among the leading M&A firms in the first half. It acquired Bear Stearns May 30.

Morgan Stanley and Lehman Brothers turned in surprisingly weak performances.