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Journalism of Courage
Mergers and acquisitions bankers are bracing for more job cuts as volumes fail to recover from their first-quarter tumble, according to preliminary Thomson Reuters numbers released on Friday, and the outlook remains bleak for the rest of 2008.
Global M&A activity fell 35 per cent in the year to date to $1.579 trillion, according to the first-half data, as the credit crunch kept buyout firms away from large deals and economic uncertainty made companies reluctant to push the button.
Private equity buyout activity, which underpinned the recent M&A boom, fell 66 per cent in Europe to $48 billion and slumped by 86 per cent in the US to $42 billion in H1.
With inflation rising and no end in sight for economic woes in the US and Europe, it seems unlikely that volumes will recover quickly to the record levels seen for the year until June 2007, observers said.
“We won’t see a boom like early-2007 for another three- four years,” said Hermann Prelle, joint-head of EMEA investment banking at UBS.
Several banks, including Citigroup Inc and Goldman Sachs Group Inc have already shed M&A jobs to try to adapt to the slower market, and there could be more cuts as the slowdown in activity eats into banks’ income.
In the US, a slowdown and bleak outlook were compounded this week as US consumer confidence hit a 16-year low and housing prices suffered a record annual drop.
The slowdown that started with the credit crunch has spread and is now undermining much of the economic stability in Europe and the US that allowed the M&A boom.
Rocky equities markets this year have not inspired confidence either. “The deal completion rate is lower because we are in a volatile market that makes underlying valuations difficult to pin down,” said David Livingstone, head of M&A for Europe, Middle East and Africa at Credit Suisse AG.
