Q1 2011 deal making seems immune to natural disasters and conflict in the Middle East

Looking at deal activity by value as we approach the end of Q1 2011 brings some interesting questions to mind. Zephyr shows global announced deal activity to be around $711bn. This is a 16% increase on Q1 2010 and is the fifth successive quarter where announced deal value has increased on the previous quarter. However, when we look at numbers of deals as opposed to deal values, the picture is not quite as conclusive.

The numbers of deals recorded in Zephyr so far in 2011 are significantly less than those recorded throughout 2010, which in turn were less than the consistent numbers of deals seen in 2008 and 2009. So it would appear that the trend of higher value deals and high valuations may be returning, especially in certain ‘hot’ sectors.

If we look at the top 50 deals announced in Q1 2011, so far they account for just under 50% of total deal value for the quarter. This top 50 includes some high profile and high value corporate takeovers, including AT&T’s $39bn takeover of T-Mobile USA, Sanofi Aventis’s takeover of Genzyme valued at $20.1bn and the takeover of NYSE Euronext valued at around $10.1bn.

Things have been warming up again within the private equity arena; Q1 2011 saw announced deals globally valued at around the $53bn level and, with the exception of Q4 2010, this is the highest level of activity seen in one quarter since before the difficult days of 2008. There have been 13 PE-backed deals breaking the $1bn deal value and a significant number of these have been exits for existing financials sponsors, proving that there is an increasing appetite to re-invest.

That said Q1 2011 has seen one of the worst natural disasters of all time take place in one of the key Asian economies – Japan – and with ongoing conflict in Libya and other uprisings in the Middle East region it will be interesting to see if these events have an effect on deal making in Q2 2011. Only time will tell.

Filed under: exit, Japan, M&A, MENA, PE, politics, dealmaking