The two halves of the third quarter

Contact: Brenon Daly

It’s rare that a single quarter is divided so cleanly into two completely different – almost irreconcilable – halves. Yet that’s exactly how tech M&A played out in the just-closed third quarter. From the start of July until the middle of August, dealmaking followed the same arc of recovery that it had tracked for most of 2011. And then, seemingly overnight, the stability and confidence vanished, swept away by renewed concerns about the state of the global economy. That left M&A in the back half of the quarter looking a lot like it did in the recession years of 2008 and 2009, rather than earlier this year.

Recent quarterly deal flow

Period Deal volume Deal value
Q3 2011 934 $62bn
Q2 2011 942 $67bn
Q1 2011 914 $86bn
Q4 2010 794 $41bn
Q3 2010 791 $50bn

Source: The 451 M&A KnowledgeBase

Just to put some numbers to the split Q3, consider this: two-thirds of M&A spending came in the first six weeks of the quarter, with the final six weeks accounting for the remaining one-third. (Incidentally, that’s the direct inverse of the typical seasonal pattern for Q3, which almost invariably finishes stronger than it starts.) The number of deals in the second half of Q3 dropped more than 10%. More significantly, however, the transactions that did get done toward the end of the quarter were much more conservative than the deals inked earlier. Of the 20 largest transactions announced in the July-September period, only four came in the back half of Q3. Click here for a full report on the challenging third quarter.