Global M&A fell off a cliff in Q1, with volume levels not seen since Q1 2014. Dollar volume was down 49.2 percent sequentially, and 13.8 percent on a YoY basis.
According to Goldman Sachs, economic uncertainty, higher levels of volatility, and uncertainty around global central bank activity all played a role in the slowdown.
From Goldman's 10-Q
During the first quarter of 2016, our business activities were negatively impacted by a challenging operating environment characterized by economic uncertainty, higher levels of volatility and significant price pressure across both equity and fixed income markets, particularly during the first half of the quarter. These factors, as well as uncertainty around global central bank activity, impacted investor conviction and risk appetite for market-making activities, and industry-wide equity underwriting and mergers and acquisitions activity for investment banking activities.
The question is whether or not the slowdown is indicative of the M&A boom being over, or is it just a temporary hiccup. Using Goldman's rationale, the boom may just be over.
Economic uncertainty abounds after the US posted a Q1 GDP of dismal .5%, and central bankers are as confused as they ever were, with planners unable to come to a consensus on who can intervene in the markets, or when, and whether or not it's ok for the US to raise rates.
If the M&A boom is over, here are the banks that will be hardest hit by the slowdown
As the WSJ points out, banks such as Goldman Sachs and JP Morgan have diversified enough businesses where they can absorb some of the slowdown in M&A, but the smaller boutique firms such as Lazard, Evercore Partners, Greenhill, Moelis, and Houlihan Lokey don't have that luxury, and may see shares hit the hardest over the coming months because of it.
As the very same conditions persist throughout the second quarter that drove such a severe slowdown in the first quarter, it's reasonable to expect that the M&A boom may have just hit the wall.
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