Credit, Economy Bring M&A Action to a Crawl

After a golden year for LBOs, experts see a chilling of a once-hot market
By Jim O'Neill,  Newser User
Posted Dec 18, 2007 11:40 AM CST
An Alltel sign is seen, Wednesday, Aug. 29, 2007 in Little Rock, Ark. Alltel Corporation shareholders approved Wednesday, a $24.7 billion buyout by a pair of private equity firms. (AP Photo/Mike Wintroath)   (Associated Press)
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(Newser) – The slowing economy and financing costs that have more than doubled since June because of the subprime collapse could ice the pace of mergers and acquisitions in 2008, Bloomberg reports. After a record $3.9 trillion in deals in 2007, analysts predict transaction value could plummet 20%. "The mega-LBO is dead,'' says an ABN Amro takeover expert.

Takeovers have slowed 33% since midyear, and the continuing falloff will hit big banks that typically help broker M&As right in the bottom line. Goldman Sachs, the world's biggest takeover adviser, is preparing for a revenue decline that could lead to its first profit drop since 2002. “We're in a very different environment than we were a year ago,” says Bank of America's global head of mergers.