Banking M&A Activity Skyrockets in Q4

Total deal value soared to $57.3 billion, compared to $4.1 billion in the previous quarter.   The aggregate value of merger and acquisitions during the last three months was boosted by “megamergers” in the industry – Bank of America Corp’s $49.3 billion offer for FleetBoston Financial Corp and Independence Community Bank Corp’s $1.5 billion offer for Staten Island Bancorp Inc, according to data provided by SNL Financial.

Also higher in the fourth quarter was the average price-to-book deal ratio, coming in at 224.38%, compared to 210.97% in the previous quarter and 165.30% in the fourth quarter of 2002.   Banking merger and acquisition activity for the period was up slightly with 68 deals announced, five more than the prior quarter’s 63 but well over the previous year’s 50.

Fourth quarter’s Insurance merger and acquisition activity was unchanged quarter-over-quarter with 83 deals and year-over-year with 302 deals. Total deal value registered $37.9 billion, a 160% increase compared to last quarter’s $14.5 billion.   The increase was due primarily to two megadeals – Anthem Inc’s $16.2 billion offer for WellPoint Health Networks Inc and St. Paul Cos’s $16.1 billion offer for Travelers Property Casualty Corp. The quarter’s average price-to-book ratio for insurance deals was 250.69%, a marked increase over 100.31% in the third quarter.

In the securities and investments segment there were 28 deals announced, a 17% increase over third quarter’s 24. Total deal value in the quarter was $2.6 billion; down 37% from last quarter’s $4.1 billion. Most of the fourth quarter value was attributable to one deal: Prudential Financial Inc’s acquisition of CIGNA Corp’s retirement business for $2.1 billion.

Also holding steady over the quarter were merger and acquisitions in specialty finance, which held steady with 20 deals, the same as last quarter.   Deal value decreased to $4.3 billion from last quarter’s $11.8 billion and year-ago quarter’s $16.6 billion. The largest deal for the quarter was General Electric Co’s agreement to acquire certain assets and liabilities of IOS Capital from IKON Office Solutions Inc for $1.5 billion.

Year in Review

Looking at 2003, there were 236 deals announced in the industry compared to 231 in 2002. Total deal value soared to $57.3 billion, compared to $4.1 billion in the previous quarter. In 2003, total deal value reached $72.1 billion, compared to $17.6 billion in 2002.

In securities and investments, total deal value for the year was $12.2 billion, a 53% increase compared to $8.0 billion in 2002. However, the total number of deals registered in 2003 was 126, a 25% decrease compared to 168 deals in 2002.

Specialty final total deal volume for the year was down 27%, with 77 deals from last year’s 106.   This corresponds with an overall decrease in total deal volume for the year.   At $19.3 billion, the yearly aggregate was down 18% to $19.3 billion from $23.6 billion in 2002. The average price-to-book ratio for specialty finance deals was 201.78%, up from the 152.51% posted in the third quarter.

Total deal value for the year in insurance was $57.9 billion, an almost 500% increase compared to last year’s $9.7 billion.