Deal volume in the U.S. was off 38% through November. That's bad. But when you break out volume by month, it's staggering. According to Howard Lanser, director of M&A for the middle-market investment bank Robert W. Baird, U.S. dealmaking in November plunged 86% from November 2007. A huge factor, certainly, is the lack of financing. And despite healthy infusions of federal cash, banks are hoarding capital instead of lending it out.
"They're afraid," says Lanser, whose firm publishes Merger Monthly, a snapshot of global deal volume. "The banks don't know what's going to happen to their balance sheets in the next couple of days, let alone the next couple of weeks. [They don't know] when the next write-offs are going to come or when the next shoe is going to drop."
Eventually, banks will start acting like banks. It's how they make their money, after all, and the lending environment, says Lanser, has never been better. "We have senior debt at LIBOR plus 600 for good deals. These are very attractive yields and very attractive rates that lenders have not seen in years, if at all, and they'll eventually attract capital back into the market."
Still, Lanser says it will probably be the middle of 2009 before the M&A market starts growing again.
- Suzanne Stevens
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