Mergers, Acquisitions Plummet In 2001Mergers, Acquisitions Plummet In 2001

A "perfect storm" of factors combined to depress merger and acquisition activity in 2001, according to a new report from research firm Webmergers.com. Stock volatility, internal housecleaning concerns, and panic over the dot-com bubble burst all conspired to dampen enthusiasms for deal making.

According to the report, buyers spent $40 billion to acquire 1,289 Internet companies in 2001. That sum, spent in four major Internet categories--infrastructure, destinations, consulting, and access providers--pales in comparison to the $90 billion spent in 2000 on destinations alone. Webmergers didn't track the three other sectors in 2000.

Of the deals that did go through, Internet infrastructure companies proved to be the hottest properties, accounting for half of the year's total spending. Buyers spent $19.9 billion to acquire 575 companies that make E-business software, network plumbing, and other tools. "To me, it's a vote for the future of the Internet," Webmergers president Tim Miller says. "It's the acquirers saying, 'We think there's a lot more to come.'"

But even if there's more to come, Miller's not sure that 2002 will see a big rebound in merger and acquisition activity. "I'm safe in saying it probably can't get much worse," he says. "There's a number of factors that are creating a much more hospitable environment, including signs of stability in stock-market prices, and signs that IT buyers have not completely shut the door."