Not surprisingly, the pace of merger activity in 2008-09 has slowed dramatically as compared with recent years. Excluding a few megadeals, the M&A world has indeed been quiet. With a weak economy and an ongoing liquidity squeeze, most pundits expect that few significant deals will happen this year—and many think that is exactly the way it should be.
The prevailing view is that acquisitions are a luxury, to be pursued in good times and forsaken in the bad. The prevailing view is completely wrong. Deals are always risky, but doing nothing in a downtown may be the riskiest move of all.
Acquisitions and divestitures are key tools in the implementation of corporate strategy. Since corporate strategy needs to be implemented throughout the business cycle, in good economic times and bad, so must M&A. In fact, many of the most value-creating deals are done during economic downturns.