M&A Activity Highest since Dotcom Days

In the fourth quarter alone, volume topped $783.4 billion, making it the fourth-largest quarter on record.
Stephen TaubDecember 28, 2005

It looks like 2005 is the hottest year for mergers and acquisitions since 2000, the peak of the stock-market boom.

According to a preliminary report by Dealogic released on December 21, just prior to the traditionally quiet holiday week, global M&A volume increased 38 percent, to $2.9 trillion, compared with $2.1 trillion in 2004.

In the fourth quarter alone, reported Dealogic, volume topped $783.4 billion, making it the largest quarter of the year and the fourth-largest on record.

Sponsor-backed M&A, defined by Dealogic as buyout investing by a private equity firm, reached a record total of $493.8 billion in 2005, up 18 percent from 2004. Private-equity firms accounted for 17 percent of global M&A activity.

In the United States, volume topped $1.1 trillion in 2005, a 30 percent increase from the $886.2 billion in 2004. This climb was aided considerably by fourth-quarter dealmaking, when volume increased to $314.7 billion, a 50 percent increase from the third-quarter figure.

The largest domestic transactions announced this year were Procter & Gamble’s $60.8 billion acquisition of Gillette, the $35.6 billion purchase by ConocoPhillips of Burlington Resources, and the $35.1 billion offer by Bank of America for MBNA.

Telecommunications was the most active industry for U.S. mergers and acquisitions with a total volume of $185 billion, followed by health care with $119.9 billion. The consumer-products industry climbed from twelfth place to sixth with $77 billion, though nearly 80 percent of this total was accounted for by the P&G-Gillette deal.

Dealogic also found that in 2005, cross-border activity into the United States reached its highest level since 2000; the total of $132.5 billion represents a 39 percent increase over last year’s figure.

(For further coverage of North American dealmaking in 2005 and a look ahead to 2006, see “A High-water Mark?” in the January issue of CFO, to be published January 1.)

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