October – a month of contradictions

The last quarter of the year has historically been the quarter where deal activity levels really push on and determine whether a year is going to be considered good or disappointing in terms of M&A deal activity.

Looking at the levels of activity in October I find myself sitting here trying to decide whether we will end up referring to 2010 as the year that M&A showed signs of recovery or whether come January 1st 2011 we will be raising our glasses to the back of another disappointing 12 months of M&A activity.

As to what is going to happen for the remaining two months I simply cannot decide. I suspect, that like the industry as a whole, some mornings I wake up and believe that yes we really are going to have a deal flourish in the last months of the year and then on other days I just can’t see it somehow.

October seems to have been a mass of contradictions not just in deal terms but in economic news terms as well. Global deal activity this month has been the lowest of the entire year, only $161.8bn worth of deals have been announced, even less than June of this year where the figure was $170bn and the excuse of winding down for summer could be loosely applied! Yet conversely private equity activity in October reached new highs of $25.3bn, the second highest monthly announced deals figure in the last 27 months.

I have to concede that October has not brought pleasant reading in terms of the bigger picture global economy, with issues such as austerity measures in the UK, currency spats, increasing taxes and emerging regulatory issues – yet then the UK goes and announces growth figures for Q3 that are ahead of forecasts. All of these conflicting factors can’t be doing anything but influencing the fragile confidence that had started to return.

The most telling statistic about October’s deal activity though is that deal numbers are lower than they have been for many years, so clearly average deal values are on the up and are being helped by some significantly large deals happening in isolation. So from an advisory point of view if you can actually find people who are confident enough to do deals and then bring them to fruition then there are good deals to be done.

Filed under: economy, Investors, M&A, PE, dealmaking