By Liz Moyer
Wall Street's revenue from global merger-and-acquisition
activity is down 22% year to date from the same period in 2011,
while its backlog of future revenue from dealmaking has declined
24% to the lowest year-to-date level since 2005, according to
Dealogic.
The strain of Europe's debt crisis and persistent concerns about
the U.S. economic recovery have tossed cold water on an M&A
market that looked as though it was heating up early last year.
Several bankers have commented on challenging times in recent
days. Goldman Sachs Group Inc. (GS) Chief Executive Lloyd
Blankfein, appearing Tuesday on MSNBC, said "The economy is not
horrible, it's just not growing the way it should and there's just
a lot of uncertainty."
That is keeping dealmakers on the sidelines. Over all,
transactions valued at $5 billion or more are down two-thirds from
the 2007 market peak, noted Greenhill & Co. (GHL) Chief
Executive Scott Bok in an investor presentation June 7, speaking of
broad industry trends. One-billion-dollar-plus transactions are
down by roughly one-half, and $100 million-plus deals are down by
one-third, he said.
The second quarter is on track to be the fourth-consecutive
quarter in which the volume of announced deals is down relative to
the prior year's quarter, Mr. Bok said in the presentation.
"There's no denying that we're in a very challenging business
environment."
As of Wednesday, Wall Street's revenue backlog, which includes
potential revenue from deals announced but not yet completed in the
last two years, was $5.9 billion, down from last year and close to
the low of $5.8 billion posted in 2005, Dealogic said in a report.
That is well off its recent peak of $14 billion hit in June
2007.
Global merger revenue is at $7.1 billion for the year to date,
down from $9.1 billion in the same period last year.
Goldman Sachs leads the backlog ranking, with $640 million in
revenue from pending deal closings. Morgan Stanley (MS) has a
revenue backlog of $452 million, while J.P. Morgan Chase (JPM) has
$406 million in revenue backlog, Dealogic said.
Lower banking revenue combined with expected declines in trading
and underwriting fees are prompting analysts who follow the big
Wall Street banks to slash their second-quarter earnings
estimates.
Write to Liz Moyer at liz.moyer@dowjones.com