Global mergers and acquisitions slumped this quarter to a levelnot seen since the aftermath of the financial crisis amidincreasing concern the economic recovery is deteriorating.

Companies have announced $446 billion of takeovers since June30, the smallest amount since the third quarter of 2009, accordingto data compiled by Bloomberg. Chinese state-run oil company CnoocLtd.'s proposed purchase of Nexen Inc. was the only transaction totop $10 billion in the period, the data show. Acquisitions are nowon pace to drop 15 percent in 2012 to $2 trillion, the lowest inthree years.

Cross-border takeovers have accounted for about half of allannounced deals this year, a trend that may continue with EuropeanAeronautic Defence and Space Co. in talks to combine with BAESystems Plc. Still, while chief executive officers worldwide aresitting on at least $3.4 trillion in cash, many remain reluctant topursue deals as Europe's sovereign-debt crisis drags on and signsgrow that China's economy is slowing.

“Executives have the cash, but they don't have the conviction,”said Andrew Bednar, head of advisory at Perella Weinberg PartnersLP, the New York-based investment bank. “I don't see any miraculouschange in the M&A markets for the foreseeable future.”

This quarter's slowdown has been most pronounced in Europe,where takeovers accounted for about $92 billion, or 21 percent, ofglobal activity, the continent's lowest share since 2010. TheAmericas accounted for $248 billion of transactions, and there were$104.5 billion in the Asia-Pacific region.

The deals that are getting done are notable for cross-bordercooperation. More than $720 billion in takeovers this year involvecompanies in more than one country, the highest share in fiveyears, data compiled by Bloomberg show.

That includes Cnooc's purchase of Canada's Nexen andBelgium-based Anheuser-Busch Inbev NV's $20.1 billion buyout of theshares of Mexico's Grupo Modelo SAB that it didn't already own.EADS, based in Toulouse, France, and London-based BAE said thismonth they are in talks on a transaction that would potentiallycreate the largest European aerospace and defense company with acombined market capitalization of more than $40 billion.

“What's remarkable about this year is the size of thecross-border transactions we're seeing,” said Michael Carr, head ofAmericas M&A at Goldman Sachs Group Inc. “They're notable in amarket that's characterized by caution.”

Goldman Sachs is the busiest merger adviser so far in 2012,working on more than $375 billion of transactions, ahead of MorganStanley and JPMorgan Chase & Co. Goldman Sachs took first placelast year in Bloomberg's ranking after Morgan Stanley led in theprevious two years.

Europe's Troubles

There are fewer deals to fight over this year, partly because ofEurope's extended sovereign-debt woes. The crisis has forcedleaders to implement aid packages in Greece, Ireland and Portugalto help preserve the 17-nation euro zone, with the euro area boundfor recession. That put a damper on the merger market, said AdrianMee, London-based head of international M&A at Bank of AmericaCorp.

“There is still a fair bit of concern about investing in Europein general, and southern Europe in particular,” Mee said. “Thereneeds to be a sustained period of confidence in the macroeconomicoutlook for the pace of deals to pick up significantly.”

China's economy also has shown signs of deterioration asmanufacturing slows, increasing the chance that the country mayfail to surpass its growth target for the first time since1998.

Still, Asian buyers struck $133.9 billion, or about a third, ofthis quarter's deals. Besides Cnooc-Nexen, the biggest proposedtransactions include Thai billionaire Charoen Sirivadhanabhakdi'sS$9 billion ($7.3 billion) bid for a 70 percent stake in Fraser andNeave Ltd. and Tokyo-based Dentsu Inc.'s 3.16 billion pound ($5.14billion) purchase of British advertising firm Aegis Group Plc.

“Asia is long capital, assets globally are cheaper, the partiesout here have balance sheets that are sound and they are in aposition to pursue international assets,” said Matthew Hanning, UBSAG's head of investment banking for the Asia-Pacific region.

Asia's quest for raw materials to fuel an industrial expansionhas bolstered deals involving natural resources and energycompanies. Sales of such companies account for about 21 percent ofthe merger market this year, almost twice their share during thefirst decade of the 21st century.

Natural Resources

“This is a trend that will continue for a significant period oftime,” said Nigel Robinson, London-based head of energy and naturalresources at Deutsche Bank AG.

Private-equity firms are playing a bigger role this year,selling companies they bought during the buyout boom of 2006 and2007, and investing in new leveraged buyouts, said AnthonyArmstrong, co-head of Americas M&A at Credit Suisse GroupAG.

LBOs increased to $39 billion this quarter, the most in morethan a year and about 9 percent of all merger activity. CarlyleGroup led the way with $15 billion of transactions, including $4.9billion for a DuPont Co. auto-paint unit and $3.5 billion for adivision of United Technologies Corp.

“Sponsors have been quiet for a couple of years, but they'reback,” said Armstrong, who is based in San Francisco.

Bednar, of Perella Weinberg, predicted that merger activity willcontinue to track this year's $2 trillion pace, and that the record$4 trillion of deals struck in 2007 during the height of theleveraged-buyout boom may stand for some time.

“It's not a small market — it continues to be a very largemarket,” he said. “But I'm not sure we're going to see theamplitude of peaks and troughs as high as they've beenhistorically. It'll be much more of a steady state.”

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