November of misery for M&A, capital markets
More bad news came streaming into the M&A and capital markets worldwide in November, according to Thomson Reuters’ snapshot of the month.
IPOs showed fleeting signs of life, follow-on offerings by capital-starved banks remained robust and investment grade bond issues remained strong, but M&A activity reached new lows worldwide and high yield corporate bonds fell to nothing.
Here is a closer look at what November had in store for the world of finance:
SIGNS OF LIFE:
After several months in comatose state, the IPO market showed brief flickers of life, with both Europe and the United States seeing their first IPOs since the summer. Polish energy company ENEA SA raised $US 739 million, while in the U.S. online university Grand Canyon Education Inc broke a 15-wk snap with a $126 million IPO. But the burst of activity was short-lived. There are no further IPOs scheduled for pricing in the U.S. at this time.
Continuing a trend since the beginning of the year, financial companies dominated the market for follow-ons, and have raised $223 billion so far this year, or half the volume globally. Mega issues by Wells Fargo ($12.6 billion) and Banco Santander $9.3 billion) helped financials dominate follow-ons in November, with a 70 percent share.
Investment grade bonds issues by financials, energy and consumer companies doubled in November over October, which had been the slowest month of the year, and Euro-denominated investment grade corporate bonds reached $55.8 billion, its highest level since August.
Convertible bonds hit a 10 year low, reaching only $1.7 billion, while no high yield corporate bonds were issued in November, the first time that has happened since March 1991. So far in the fourth quarter, the only high yield corporate bond was issued by troubled casino operator MGM Mirage, for $699 million.
Global syndicated loans were down again in November, totaling $88.8 billion, the lowest level since January 2003.
MERGERS & ACQUISITIONS:
All was sleepy on the M&A front as well. The European Union and the United States saw their lowest M&A levels year-to-date since 2005, while Asia was at is lowest levels since 2006. In the United States, 491 acquisitions totaled $22 billion, the lowest number of deals since September 2001.
And the aborted takeover of Rio Tinto by BHP brought canceled M&A activity to $327 billion in the fourth quarter, not far below the $413 billion worth of deals that managed to be completed.
At least the financial crisis has turned governments into M&A machines. Fed by 51 acquisitions worldwide of equity stakes in financials totaling $24 billion in November, government bailouts have now reached $181 billion so far this year. In fact the U.S. Treasury’s purchase of warrants for shares in Citibank worth $2.7 billion ranked as the ninth biggest M&A deal worldwide in November.