Horror of Lehman's fall haunts global M&A space

The ripple effects of the fall of Lehman Brothers in September last year is evident in the field of global mergers and acquisitions (M&A), which have shrunk nearly 40 per cent since then.

According to global deal-tracking firm Dealogic, in the 12-month period from October 2008, the value of announced global M&As stood at $2.17 trillion, down 39 per cent from $3.58 trillion in the previous 12-month period.

Global M&A activities, which reached its nadir on July 2008, witnessed a huge erosion both in terms of value as well a volume in 2009.

The value of global M&As for August 2009 ($119.8 billion) was the lowest since September 2003 ($117.5 billion), Dealogic said.

The report further stated that the deal size, too, had became significantly smaller, highlighting the slowing market for large deals.

“Around 87 per cent M&A deals since Lehman’s collapse were below $100 million, up from 81 per cent in the 12 months prior to that,” Dealogic said.

“Financial institution group (FIG) M&A deals, valued over $1 billion, accounted for 18 per cent of all deals in this value band in the 12 months prior to Lehman’s collapse but jumped to 36 per cent of all the over $1 billion deals in the following 12 months,” it said.

The report said the fall of the former financial giant triggered the global financial turmoil, pursuant to which there were a large number of government acquisitions of stakes in banks as well as mergers in the financial sector.

The number of distressed M&A transactions had also grown to record highs across all regions, the report added.