That was quick

A couple of months ago we were in a golded age, with bankers saying they would be dancing to the tune of dealmakers until the music stopped. Suddenly it did. WSJ:

The last deals boom, which ended in 2001, was propelled by a rising stock market, especially in the technology sector. That enabled companies to use their inflated stock as currency to make bold bids for corporate icons. The pinnacle of that boom was America Online’s acquisition of Time Warner.

The latest boom, which stretched from the end of 2003 to the middle of this summer, is looking to Wall Streeters like the richest era since the rise of the modern deal-making industry in the 1980s. From 2004 to date, about $13.32 trillion worth of deals were struck, according Dealogic. That exceeds the total during the technology boom years of 1998 to 2001, when, adjusted for inflation, $13.21 trillion of deals were struck. Inflation-adjusted totals for the 1980s deals boom were far lower. In the most recent cycle, cash rather than stock played a bigger part in the average deal.

What fueled it was cheaply priced credit — bank loans and high-yield bonds were readily available. The biggest beneficiaries were private-equity funds, which took advantage of low interest rates and lax terms from lenders to make acquisitions more cheaply and with lower risks than corporations could. In 2000, leveraged buyouts accounted for only $14 of every $100 spent on deals in the U.S. This year, through July, they accounted for $37 of every $100. Earlier this year, investors were suggesting huge companies such as Home Depot Inc., then worth about $100 billion, as candidates for leveraged buyouts.

“I would call it a very unusual confluence of cheap debt, huge pools of money to invest, and asset prices that became unattractive to most companies,” says Marc Granetz, co-head of investment banking for Credit Suisse in New York. The credit-market trouble “means we aren’t likely to see large or very levered private-equity deals for some time.”

With over $300 billion in deals unable to be securitized, the hangover from the dance marathon just might last for a while.

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