Merger and acquisition activity continues to slump right along with sickly equity markets.

Crosbie & Co. says that only 229 deals were announced in the second quarter of 2001, down 29% from the same quarter last year. The dollar value of those deals shows an even worse picture, dropping 51% to $36 billion. “The weaker overall M&A numbers we are seeing reflect continued concerns regarding the economic outlook and difficult capital market conditions that make it challenging to finance transactions,” said Ian Macdonnell, a partner with Crosbie.

If there is a bright spot, it’s that the activity in the second quarter improved a bit from the even weaker first quarter. In the year-to-date, dollar volume is down 60%. In fairness, Macdonnell points out that we are coming off record highs in M&A activity.

Not only are fewer deals happening, they are also smaller, as the markets have contracted market caps. This quarter there were just 14 so-called megadeals, down from 22 last year. The biggest deal in the quarter saw Conoco Inc. buy Gulf Canada Resources for $6.7 billion. Megadeals still figure prominently in cross-border activity, particularly as U.S. firms hunt Canadian energy assets.

The energy sector was busy though, with 40 deals happening in Q2, worth $12.7 billion, up 230% from Q1, and almost triple the quarter last year. The industrial products sector remains busy, although deal value is down significantly. Crosbie says that the other busy sectors were financials, media stocks and consumer companies, although the volume is down significantly in each group.