The long-anticipated recovery of the U.S. mergers and acquisitions market has yet to arrive, and it may not arrive this year, according to Mergerstat LP. The firm tracks M&A information for the global financial and consulting communities.

“The trouble is that caution still abounds in a segment beset by layoffs, restrictive lending policies, and a volatile U.S. stock market. One look at the numbers tells you all you need to know. For the first six months of 2002, deal volume reached just 3,406 transactions while deal value stalled out at US$184.2 billion, the slowest first half for the broad M&A market since 1996,” it says.

“For many big public corporations, it has been a difficult time to deal. New acquisitions are not a popular notion among investors fretting about accounting scandals, quarterly earnings projections, and previous buying binges. In fact, the number of public companies that made acquisition announcements in the first half of 2002 slid to 2,247, the lowest level since 1996,” it notes.

Mergerstat reports that U.S. private equity and venture capital firms say that they are flush with funds, but unable to put those funds to work in the kind of deals that will generate attractive returns for their investors. “According to some industry observers, there may be as much as US$228 billion sitting on the sidelines. Interestingly, as a way to combat the tough lending environment, some middle-market players have turned to the private equity and venture capital groups as a means of alternative financing.”

Others have turned their attention to bankruptcies. Currently, the market is on pace to record the highest number of M&A bankruptcy deals ever.

Mergerstat notes that despite the huge deterioration in deal volume the tech industry is still the hotspot for dealmaking, recording 653 transactions in the first six months of 2002. The Brokerage, Investment & Management Consulting industry came in second with 208 transactions, followed by the Wholesale & Distribution industry with 149 transactions, the Banking & Finance industry with 140 transactions, and the Insurance industry with 133 transactions.

On the advisor front, Credit Suisse First Boston topped Goldman Sachs for the number one advisor spot on Mergerstat’s league tables. The Boston-based M&A group reported advising on US$50.8 billion worth of transactions compared to Goldman Sach’s reported US$47.6 billion. Schroder Salomon Smith Barney finished third with US$42.9 billion, followed by JP Morgan Chase with US$28.8 billion, and Morgan Stanley with US$27.9 billion.