UPDATE: Dealmaking To Return In '09?


As we first told you on Monday, 2008 will be remembered for many things, but the urge to merge isn't one of them.

Death of the Deal

In perhaps the most dramatic sign of how troubled the M&A market was this year, a record number of previously agreed deals—over 1,100—were cancelled.

Among the deals to collapse this quarter was the largest-ever leverage buyout as BCE failed to pass a solvency test and a $28.3 billion purchase by a group of private equity firms fell apart.

Mining company BHP Billiton scrapped its $66 billion takeover for rival Rio Tinto in November, while Huntsman terminated its $6.5 billion deal to be bought by Apollo Management's Hexion Specialty Chemicals.

“M&A deals died in '08, in part because of the deterioration of the business environment overall,” explains M&A attorney Frank Aquila, a partner with Sullivan and Cromwell. In other words, with credit hard to come by – it was tough to get anything done.

A Bright Spot

One bright spot was hostile deal activity, with the U.S. seeing the most unsolicited bids since 1999.

Unsolicited deals, in which one company makes an uninvited takeover bid for another, included InBev's $60.4 billion acquisition of U.S. brewer Anheuser-Busch .

Some hostile bids failed, such as Microsoft's bid for Yahoo while Samsung Electronics walked away from its $5.9 billion unsolicited bid for flash-memory card maker SanDisk.

Going Forward

“I expect to see signs of life from the deal world in 2009,” Aquila tells Fast Money. “Once people are confident we’re in a stabile lending environment, it will create an incentive for new deals.”

And when new deals start to get done Acquila expects to see consolidation in financial services, energy & basic commodities, retail, health care / pharmaceuticals / medical devices, and infrastructure.

Acquila also tells us, “strategic buyers as well as non-U.S. buyers could emerge as key players in 2009, but don’t expect a lot of private equity deals. And look for more stock mergers, mergers of equals, and sales of distressed assets next year.

And that leads to our Fast Money Reader Poll.

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