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Private Company Capital Newsletter
2005 Mid-Year M&A Update
M&A activity continued to be strong in the first half of 2005. According to preliminary figures from Thomson Financial, the total value of announced transactions increased approximately $81.4 billion, or 17%, to $548.3 billion for the first six months of 2005, versus $466.9 billion for the same period in 2004. Announced deal volume for the first half of 2005 (4045) declined slightly versus the same period in 2004 (4158).
As was the case with the first quarter, a deeper analysis of the statistics (summarized in the adjacent chart) indicates that much of the gain in aggregate transaction volume in the first half of 2005 was again led by a number of recent billion-dollar-plus announcements. Among the largest in the second quarter, Bank of America agreed to acquire MBNA for $35.0 billion and Chevron and China’s CNOOC are fighting to acquire Unocal for more than $18.5 billion. Private investors were also active buyers in large transactions during the first half of the year, which saw a marked increase in billion-dollar-plus announcements by private investors. Private investors were aided by the active fundraising environment and continue to be prodded by the large overhang of uninvested capital. For transactions less than $1 billion, aggregate transaction value declined approximately $8.8 billion, or 6%, from the same six-month period in 2004, while the number of transactions under $1 billion has remained essentially the same. However, it should be noted that transaction volume across the board remains strong by historical standards. In addition to the statistics, we gain additional insight from our frequent interaction with the market’s buyers and sellers. Twelve to 18 months ago, sellers cautiously tested the market by bringing out properties that were most easily accepted by buyers—properties with long track records of growth and profitability. As the market has become healthier and success stories abound, more and more properties are being offered. Now mixed in with the many straightforward sellers are some with a more challenging story to tell. There are no compelling reasons why the second half of the year shouldn't be as good as or better than the first half. Key drivers of continued strength in the M&A market include:
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