The resilience of strategic deals

The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.

But there is a bright spot: strategic acquisitions. If anything, we are seeing a variety of mega deals in this category. A survey from Dealogic shows that – as of June 25 – there were $597 billion in strategic M&A transactions, only 2% down from last year's total.

Some of the notable deals include: InBev's $49.9 billion play for Anheuser-Busch Cos. (NYSE: BUD), Mars' $23 billion deal for Wm. Wrigley Jr. Co. (NYSE: WWY) and Dow Chemical Co's (NYSE: DOW) $18.8 billion cash purchase of Rohm & Haas Co. (NYSE: ROH). The last two have involved financing from Warren Buffett's Berkshire Hathaway (NYSE: BRK.A).

Why the resilience with strategic deals? Well, there are several key reasons.

First of all, it helps that the equity markets have been in bear mode. No doubt, this makes it easier to get compelling valuations.

Next, there isn't much competition from private equity buyers. Just a few years ago, PE firms essentially crowded out many strategic buyers that couldn't get the kind of financing leverage.

Finally, the drop in the dollar has made U.S. assets pretty cheap. As seen with the Anheuser deal, InBev had little trouble raising its bid from $65 to $70.