Mergers and acquisitions bankers face a spotty recovery in 2010, as the economy's climb out of recession sparks deals in some sectors but not others.
While overall M&A volume is expected to climb only modestly, traditional deals will likely displace the rescues and restructurings that accounted for around 20 percent of 2009's $2 trillion M&A total. Next year's numbers "may look flat on paper, but when you take out a lot of the noise of this year, it really indicates more traditional merger transactions and a healthier market," Paul Parker, head of global M&A at Barclays Capital, told Reuters. Barclays estimates 2010 deal volume at $2.1 trillion.
Energy and health care - the only two industries whose M&A volume grew in 2009 - are expected to remain hotbeds of activity next year, Reuters says. The industrials, financial institutions, and technology sectors are also expected to keep M&A bankers busy.
Banks' combined fees for M&A advisory shrank 46 percent this year to $18.9 billion while the combined value of deals slid 32 percent according to Thomson Reuters data. Acquisitions made by "financial sponsors" (private equity firms) fell 45 percent to $130 billion, the smallest amount since 2002. Only two PE deals greater than $5 billion took place all year. That makes a stark contrast with the years immediately preceding the financial crisis, when PE firms drove many transactions in the $20 - 60 billion range.
Bankers say they see financial sponsors coming back to life. Still, any revival of buyout activity depends on banks regaining their capacity to extend credit for leveraged deals. That means strategic corporate acquirers will remain in the driver's seat - as illustrated by Exxon Mobil's $30 billlion purchase of XTO Energy announced last week, and Comcast's $30 billion planned purchase of NBC Universal.
Reuters reports that Morgan Stanley vaulted past Goldman Sachs to lead the global M&A league table in 2009 for the first time since 1996. Goldman had held the top ranking for each of the preceding 12 years.