Mergers and acquisitions dependent on EU returning to strength

DEALMAKERS could find themselves with even more free time on their hands next year if Europe’s fiscal roadmap fails to convince investors and stabilise global markets.

In Europe, activity will be flat at best next year even if measures agreed to at last week’s EU summit restore confidence that the debt crisis can be overcome.

“We need at least two years before we have visibility on how or if things will stabilise. It is too early to call and any [merger and acquisition ] &rebound will depend entirely on this wider picture,” said Michael Tory, a former Lehman banker and a founding partner of London advisory boutique Ondra Partners.

Bankers in Asia and North America are hoping Europe will not pull them down with it.

“If we see stabilisation in Europe — not necessarily a lot of growth — then I believe deals can get done and priced appropriately,” said Steve Baronoff, chairman of global M&A at Bank of America Merrill Lynch.

“Unless Europe experiences significant upheaval, the intermediate term for M&A has some very good macro factors.”

M&A volume in the Asia-Pacific region, excluding Japan, is set to rise by one third next year after dipping in 2011, according to Thomson Reuters/Freeman Consulting estimates, as cashed-rich Asian firms step up acquisitions to take advantage of depressed prices.

“If you are working closely with a company getting ready to push the button to do a deal, and the market is souring in Europe, companies will pause,” said Todd Marin, JPMorgan’s head of investment banking for the region.

Global mergers and acquisitions rose by 3% this year to $2.464 trillion (€1.89tn) from $2.396tn in 2010, according to Reuters. &

But activity declined dramatically in the second half, with dealmaking in the fourth quarter falling 31% from the previous three months to $398 billion. It was the third consecutive quarterly decline and the lowest quarter overall since the third quarter of 2004.

European M&A was $96.34bn in the fourth quarter, the lowest since the third quarter of 2002.