On July 15, $32.2 billion pharmaceutical giant Pfizer Inc. announced that it would buy $13.8 billion drug maker Pharmacia Corp. for the impressive sum of $60 billion in, glory be, an all-stock deal. Hearts began to palpitate; palms began to sweat. Ah, now that's more like it, Wall Street thought.

But as many suspected at the time, it was just a brief throwback to the rich past. The numbers tell the story: Deal volume of $321 billion for the first nine months of the year is just 55% of what was generated in the first three quarters of 2001 and a mere shadow of the pace set in 2000. In fact, given a potential annualized total of $426 billion for 2002, this is the slowest year for M&A on a nominal basis since 1994. What's more, if one excludes the Pfizer-Pharmacia deal, companies have racked up 70% of the value of this year's acquisitions using cash, well above the long-term average of 60%, according to J.P. Morgan Chase. That's a complete turnaround from few years ago when bloated stock prices and lax accounting guidelines encouraged companies to do deals with stock alone: In 1998, stock deals peaked at 69% of all M&A transactions by value.

Market Slide Impedes Pricing