Emergency sales lift deal value

Global mergers and acquisitions decreased in the third quarter, but emergency sales and takeovers of beleaguered financial institutions helped lift the average value of third-quarter deals.

As of Sept. 24, third-quarter deal volume fell to 2,180 compared with 3,675 in the year-earlier quarter, said Mergermarket, an independent M&A service. But the average value of those deals rose to $314 million from $232 million.

Similarly, the number of North American deals fell to 753 from 1,193 in the year-earlier period, and the average value of those deals rose to $402 million per deal from an average of $289 million, Mergermarket said.

Mergermarket also said that, as of Sept. 24, the industrial sector was the busiest by volume, as usual, accounting for 20 percent of all deals. The energy, mining and utilities sector was the most active sector by deal value with energy companies divesting natural-gas properties while natural-gas prices remained at a record high.

The greater value of the quarter's mergers and acquisitions reflects, in part, a handful of September deals, including the all-stock sale of Merrill Lynch & Co. for about $40 billion, as well as tobacco business Altria Group's (MO) $11.5 billion acquisition of UST.

The global credit crunch hammered private-equity participation in mergers and acquisitions. In comparison to past years, private equity played no significant role in this year's top deals.

Should other deals come through — such as Monday's announcement that Citigroup will buy the banking operations of Wachovia in an agreement that includes Citi absorbing up to $42 billion in losses — financial services M&A activity could rise even more sharply.

A week before the end of the third quarter, the financial sector already accounted for 16 percent of all deal value for the year, though only 8 percent of deal volume.