For the complete ranking results, please go to the Research & Rankings section of this site and click on the link to the Americas 2001 Deals of the Year.
Start with a bear market. Then throw in a deepening recession, the September 11 terrorist attacks on the U.S. and the ensuing war in Afghanistan. The end result was a far different , and much worse , climate for deal making in 2001 than in recent years.
For one thing, all that uncertainty meant fewer deals. Bond markets performed well because of steadily declining interest rates, but new equity issuance fell 20 percent from 2000. The volume of announced mergers and acquisitions plunged a stunning 50 percent, according to New York research firm Dealogic. Investors, preoccupied with looking for bargains amid the downturn, harshly scrutinized any new offerings put on their plate by Wall Street’s increasingly frustrated investment houses. Consequently, hostile takeovers, proxy fights and bankruptcy proceedings captured the attention of deal makers instead of skyrocketing IPOs and friendly megamergers bent on changing the world.
Topping the list of noteworthy transactions was the collapse of staid-utility-turned-sexy-energy trader Enron Corp., done in by questionable accounting practices and off-balance-sheet dealings. The Houston company’s $63 billion bankruptcy filing was the biggest in U.S. history and capped a record year for major corporate
bankruptcies. Perhaps it was no surprise, then, that investors grew increasingly skeptical of some high-flying deals in 2001. Among them: Hewlett-Packard Co.'s agreement in early September to acquire Compaq Computer Corp. for $22 billion, which appeared doomed after the stock market , and the Hewlett-Packard heirs , gave it a thumbs down.
Unsolicited takeover bids got plenty of attention from value-starved shareholders, though, especially as buyers sought to exploit depressed share prices. Some hostile bids, such as cable company Comcast Corp.'s offer to buy AT&T Broadband and satellite communications concern EchoStar Communications Corp.'s effort to take over General Motors Corp.'s Hughes Electronics Corp. subsidiary, turned friendly after the targets agreed to negotiate. Others got ugly. Witness SunTrust Banks’ failed proxy fight to break up the $14 billion merger pact between Wachovia Corp. and First Union Corp., or papermaker Weyerhaeuser Co.'s successful proxy battle to replace three directors on the board of hostile-takeover target Willamette Industries.
To be sure, there were plenty of deals that proved notable for less notorious reasons. Vivendi Universal’s $10.3 billion acquisition of USA Networks gave the French conglomerate a television distribution network for programming generated by its Universal Studios subsidiary. EchoStar’s surprising win in the battle for Hughes put a big crimp in the satellite TV strategy of rival bidder Rupert Murdoch’s News Corp. And in a year in which IPO nearly became a dirty word , consider the government investigations into Wall Street’s stock allocation practices during the dot-com bubble , Weight Watchers International managed a strong debut, rising 23 percent in first-day trading.
Last year also saw unusually fierce competition among Wall Street firms for a declining pool of deals. Commercial banks, armed with newly acquired securities capabilities, increasingly used their huge balance sheets to muscle investment banks like Goldman, Sachs & Co., Merrill Lynch & Co. and Morgan Stanley out of major transactions. WorldCom, for instance, chose only its commercial bank lenders to underwrite its record bond issue. Behemoths Citigroup and J.P. Morgan Chase & Co. won lead roles on several other deals , including a series of transactions for struggling telecommunications concerns Lucent Technologies and Motorola , in large part because of their role as creditors to these companies during lean times.
For the complete ranking results, please go to the Research & Rankings section of this site and click on the link to the Americas 2001 Deals of the Year.
