NEW YORK ( TheStreet) - Just as stocks hit 2011 lows , evidence arrived on Monday that M&A markets have seen activity slow to the lowest levels of the year. And unless overall financial conditions improve and the volatility gets dialed back, the deals drought could give way to a freeze. According to quarterly numbers released by financial data firm Dealogic, global mergers and acquisition activity fell 19% in the third quarter, the poorest performance of the year after rising by more than 20% in each of the first two quarters of 2011. After starting on the best merger pace since 2008, M&A is now tracking at its worst level since the second quarter of 2010, making the risk of a double-dip in the deal market for 2011 a reality. While falling back from the highs of this spring and summer, M&A is still growing for the year. Even counting this quarter's fall, deals are up 9% to $2.18 trillion compared to this time last year, Dealogic said. Whether the market will post growth this year overall though is a close call. To break even for the year, another $640 billion in mergers will need to get done in the final quarter of the year -- a number higer than this quarters $633.3 billion of deals and one that won't be easy to reach considering the deterioration that took place from July to September. Here's a list of the 5 biggest deals from the third quarter. They may need to be eclipsed in size if overall M&A is going to be higher in 2011 than 2010.
Express Scripts Buys Medco Health Solutions for $29.1 BillionOn July 21, Express Scripts ( ESRX) bought Medco Health Solutions ( MHS); a combination of the two companies would create the nation's largest pharmacy benefit managers. The deal valued Medco at $71.36 a share, more than 25% above its closing price prior to the announcement. The combination with Medco would add 135 million customers to Express Scripts, roughly a 50% increase. CVS Caremark ( CVS) the third largest pharmacy benefits manager in the U.S. currently has roughly 85 million customers according to Arthur Henderson, an analyst at Jefferies ( JEF). Medco is currently trading at close to $46 a share, reflecting falling markets since the deal was announced and concerns over whether the U.S. antitrust authorities would block the merger of the two largest pharmacy benefits managers based on market concentration concerns. In September, Express Scripts defended its $29.1 billion acquisition of Medco Health Systems Inc. against anti-trust allegations. Downplaying concerns about industry concentration, Express Scripts Chairman George Paz said in a statement for a U.S. House Judiciary Committee meeting about the merger, "Express Scripts is one of more than 40 pharmacy benefit manager, or PBM's, operating in the United States." The deal is expected to close in the first half of 2012.
United Technologies Buys Goodrich 16.4 BillionIn September, industrial conglomerate United Technologies ( UTX) bought Goodrich ( GR) for $16.4 billion, valuing the commercial aerospace parts and landing gear specialist Goodrich at $18.4 billion when counting the $1.9 billion in debt that comes with the purchase. UTX paid Goodrich $127.50 a share, roughly a 50% premium over the price of shares before merger rumors of a takeover began circling. The $127.50 price was the highest stock price for Goodrich in its 23-year history, and an 80% gain on pre-recession stock highs. According to analysts, Goodrich's landing gear and aerospace expertise will be added to United Technologies' aerospace divisions, which include Sikorsky helicopters, Pratt & Whitney plane engines and its aerospace electronics unit, Hamilton Sundstrand. The deal came as United Technologies was looking to grow its presence in commercial aircraft sales and diversify from its military aircraft focus. United Technologies also sells Carrier climate control units, Otis elevators, and UTC fire, security and power services. With Goodrich's nearly $7 billion in annual revenue added to United Technologies $22.2 billion in aerospace revenue, the combination would cause aerospace to be just under half of total UTX revenue. The deal is expected to close in mid-2012.
Google Buys Motorola Mobility Holdings for $12.5 BillionIn mid-August, Google ( GOOG) took Silicon Valley's patent war to a new level by buying Motorola Mobility ( MMI) for $12.5 billion or $40 a share, a 63% premium above market prices prior to the deal announcement. Google's deal was done to help its Android operating system for mobile phone devices fend off patent litigation and further move into a top market position. When the deal was announced Chief Executive Larry Page said, "Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business." Page's statement was an effort to show antitrust regulators Google wouldn't use the purchase to change prices paid by existing Motorola Mobility license holders and competitors. In September, Google said on its corporate blog that the $12.5 billion purchase of Motorola Mobility had come under increased scrutiny by antitrust enforcers at the U.S. Department of Justice. Shares of Motorola Mobility are less than 2% lower than when the deal was announced, signaling a falling market and antitrust concerns haven't caused investor alarm. The deal is expected to close by the end of 2011 or early 2012.
BHP Billiton Buys Petrohawk Energy $12.1 BillionIn mid-July, BHP Billiton, the Australian mining giant bought Houston- based Petrohawk Energy for $38.75 a share, a 65% premium over stock prices before the deal was announced. It was the largest foreign purchase by an Australian company in its corporate history and signaled Melbourne-based BHP's push into booming U.S. shale gas exploration. Petrohawk, a shale gas exploration leader had assets in some of the largest formations for shale drilling, including the Eagle Ford, Haynesville and Permian Basin. Earlier in the year, BHP bought a similar set of shale gas assets from Chesapeake Energy ( CHK) for $4.8 billion. The purchase was completed in late August after receiving approval from the Committee on Foreign Investment in the U.S. Petrohawk no longer trades as a public stock.
Hewlett Packard buys Autonomy for $10.3 BillionHewlett Packard ( HPQ) the largest U.S. personal computer agreed to purchase British software giant Autonomy for $42.11 a share on Aug 18th, a 64% premium to the market price of shares. The acquisition marked a drastic change in the 72-year old company's strategy by former chief executive Leo Apotheker to spin its personal computers and handheld devices divisions and shift into higher margin software and business services. Since the deal was announced, the struggling U.S. computer giant's board fired Apotheker, who previously ran German services giant SAP ( SAP) in September and replaced him with Meg Whitman the former chief executive of Ebay ( EBAY). After Apotheker's ouster, C.E.O Whitman said of the services unit purchase, "We are behind the actions that were taken on Aug. 18. We are firmly committed to Autonomy." As a result of falling revenue and earnings as well as a leadership carousel, shares are among the worst performers in the Dow Jones Industrial Average, falling almost 44% year to date.