Toronto’s Crosbie & Co reports that second quarter M&A activity dropped 16.7% to $22.3 billion, its lowest level since the second quarter of 1999. However, deal volume increased 25.7% from the first quarter to 254 from 202.

Crosbie says that the overall value of the M&A activity is declining due to lower average deal values, falling valuation multiples, and the uncertain market and economy.

A lack of big deals is the big reason for the falloff in total value. Only seven deals in excess of $1 billion were done in the first half, accounting for just $24.1 billion in total value, which is down 31% year over year. “In these choppy markets, with lower merger and acquisition valuations, many companies generally feel their stock prices are too low for major transactions,” said Brad Cherniak, partner at Crosbie. “As well, skittish investors are not thinking big and are trying to avoid the stock price sledgehammer, hence, the death of ‘big concept’ mega-deals.”

The hottest deal sectors in the quarter were oil and gas, consumer products, and communications. Although the energy sector also led the decline in deal value, with just $2.9 billion worth of deals done in the quarter, down from $13.2 billion in the first quarter and $12.7 billion in the quarter a year ago.

For the first half, M&A action is down in both value and volume in the financial services, industrial products, and paper and forestry sectors, among others. Financial services deal volume fell 27%, and deal value is down 71% to $4 billion from $13.7 billion.

Cross-border activity continued apace. Although Crosbie notes that, contrary to talk about the hollowing out of corporate Canada, Canadian firms continue to be bigger buyers of foreign firms than they are sellers to foreigners. Canadian acquisitions of U.S. firms rose 4.4% in the quarter to 71. While U.S. acquisitions of Canadian firms slipped 9.6% from 52 to 47.