A historic drop, a historic rebound

The bankruptcy of Lehman Brothers, which came in a stunning and terrifying rush exactly 10 years ago, stands as a kind of highlight of an economy brought low. And fittingly enough for the largest Chapter 11 filing in US history, when the bank went under, it took a lot of other things down with it.

Credit disappeared, as would-be lenders began to wonder if other firms – on Wall Street and Main Street – might be going the way of Lehman. Equity markets plummeted, as investors rushed to escape the grasp of the brutal bear market. Businesses stopped spending, as they hunkered down to preserve rapidly evaporating liquidity.

The corporate capital constriction also hit M&A, most visibly at the top end of the market. To understand just how dire dealmaking was during the 2008-09 crisis, consider this: The number of transactions valued at more than $1bn announced in those two years sank to the lowest level since 2004, when the tech M&A market was only recovering from a largely self-inflicted recession at the turn of the millennium.

With just 30 acquisitions valued at more than $1bn in both 2008 and 2009, the number of big prints during the credit crisis dropped to less than half the level of the three previous years, according to 451 Research’s M&A KnowledgeBase. More tellingly, during the darkest days of the recent recession (essentially, the second half of 2008 and the first half of 2009), activity was just a fraction of that. Although the US economy started to find its feet again at the beginning of the current decade, thanks to unprecedented propping up from the Federal Reserve, tech acquirers took some time to find their way back to the top of the market. The M&A KnowledgeBase shows that it wasn’t until 2014 – almost a half-decade after the recession officially ended, with the Nasdaq Index having already tripled off its low – that the number of tech deals valued at more than $1bn reclaimed its pre-recession level.

Now, with equity markets trading near record levels, M&A activity in the rarified air has followed suit. In just the first half of this year, tech buyers – including big names such as Microsoft, Broadcom, Salesforce and others – printed more than 50 transactions valued at more than $1bn. The current record pace means acquirers are announcing two billion-dollar deals every week, a stunning acceleration compared with announcing fewer than two billion-dollar deals every month when the credit crisis was bottoming out.