Last year a long list of ailments severely constricted a healthy flow of transactions: weak global economic growth, corporate scandals, bankruptcies, devastated telecommunications and technology businesses, not to mention threats of war and nuclear destruction. These shaped the criteria and limited our choices for inclusion in 2002's Deals of the Year.
No region or industry was immune to problems. France's Vivendi Universal, after ousting its acquisition-happy CEO, Jean-Marie Messier, in July, spent the rest of 2002 unwinding his deals. Even the famed art collection of Joseph E. Seagram & Sons, which Messier had purchased, was slated to go on the block to pay debts. Despite robust local growth, China Telecom had to cut the size of its joint New YorkHong Kong share listing by 60 percent when the shares of rival telecoms faltered and bureaucrats in Beijing misjudged the depth of investor nervousness.
In this cruel environment deal makers tried to persuade buyers that depressed prices wouldn't last much longer -- better to act now. One investor who agreed: Hong Kong's Li Ka-shing, whose Hutchison Whampoa conglomerate pocketed a controlling interest in U.S.-based telecom Global Crossing at a roughly 99 percent discount to its peak valuation.
Distress was 2002's overriding theme, but fortunately it wasn't the only story line. Banking consolidation accounted for some significant deals. French giant Crédit Agricole paid a hefty E16.5 billion ($17 billion) for rival Crédit Lyonnais. The combined bank becomes France's biggest retail lender and a potential European powerhouse.
Big, growth-inspired transactions like Crédit Agricole's offer hope that deals will flow more easily in 2003's capital markets. That would cheer Matteo Arpe, the subject of this month's banking story (page 22). The 38-year-old former Mediobanca star is trying to revive Italy's fourth-largest bank, Capitalia, the former Banca di Roma. To jump-start the turnaround, Arpe is relying on the deal-making ability of a new investment banking unit. If Arpe can't generate transactions while simultaneously reinvigorating his inefficient commercial banking business, he's likely to be forced to sell the bank. If he succeeds, however, he will be expected to make a big acquisition to solidify his position. Either way, Arpe and Capitalia are apt to be prime candidates for inclusion in next year's Deals of the Year roster.