Contact: Brenon Daly
As we were putting together our full report on M&A last year and the outlook for this year, we couldn’t help but notice the fact that 2010 basically slumped to an end. On average, spending hit just $12bn in each of the last four months of 2010, down from about $20bn for the summer months. Not only that, spending in the September-December period last year substantially lagged the same time in 2009, with three of the four monthly totals in 2010 actually declining, year over year.
The rather muted M&A activity toward the end of 2010 stands out even more because there was a lot of confidence in the equity markets during that time. Despite a long-standing correlation between the two markets, dealmakers basically sat on their hands during the tremendous rally in the final months of 2010, which essentially accounted for all of the gains on the indexes last year. The Nasdaq jumped 17% last year, although more than a few tech companies wrapped the year with tidy triple-digit gains in their stock prices.
To explain the unusual decoupling between the equity and M&A markets in 2010, we might point to the unprecedented government intervention in the debt and credit markets. In the short term, the measures have helped buoy those markets, even if some of the underlying problems (unemployment/underemployment and foreclosure rates) remain alarmingly unresolved. There was no Washington-brokered ‘stimulus package’ for dealmakers. (Again, see our full report to get more details on activity and valuations in the year that was, and what to look for in the year that’s here.)