October 5, 2001
The downturn that has hit nearly every sector of the economy affected the financial services industry, too, as M&A activity during the third quarter, as tracked by SNL Securities LC, fell off from the already sluggish levels of the preceding period and dropped sharply from the year-ago quarter. Even a smattering of billion dollar-plus deals across the securities and investments, banking, insurance and specialty finance industries could not restore deal values to anything near their year-ago levels. In sheer number of transactions, only the securities and investments sector saw any increase, while others plunged from year-ago levels in that regard, too.
M&A among banks and thrifts accounted for 46 transactions compared with 66 in the prior quarter and 74 in the year-ago period. Deal value fell even more sharply, mirroring the growing preponderance of midsize deals that obtained across the financial services sector: $2.2B in the third quarter 2001 compared with $24.8B in the previous period and $39.4B year ago. In insurance, deals declined to 53 in the third quarter from 74 in the same period last year. Similarly, deal value was $4.6B compared with $9.0B last year.
The specialty finance sector continued the downward slope that has characterized it for five quarters. At 25, third-quarter deals were two-thirds the number of one year ago and two fewer than the second quarter of 2001. Buoyed by General Electric Capital Corp.'s sector-shifting agreement to buy commercial finance giant Heller Financial Inc. for $5.6B, deal value for the quarter leaped to $6.8B from the previous quarter's $1.2B but couldn't compare to the $33B of one year earlier.
The one-year drop-off in deal value was similar in the securities and investments sector where the third quarter's 45 deals totaled $5.5B in value next to the year-ago period's $36.1B in value. The number of deals in the sector exceeded the prior quarter's -- 45 compared to 43 -- and outpaced the year-ago number, too, when 35 transactions were announced. But last year's activity was buttressed by several big-value transactions -- a trend not reprised in the third quarter of 2001.
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