If ever there was a year of two halves, 2007 was it.

Remember the good times? In early February, Blackstone completed the biggest buyout since RJR Nabisco with its acquisition of Equity Office Properties. Just weeks later, Kohlberg Kravis Roberts one-upped Blackstone with a $45 billion buyout offer for the utility TXU.

Money was cheap, the bidding was intense, and the premiums were huge. The slowing housing market seemed to be a distant rumble.

But somewhere around the middle of a Hamptons summer rental, everything changed. Two Bear Stearns hedge funds made some noise about losses in June. In July, Standard & Poor’s started downgrading. By August, the credit markets had officially turned upside down.

The fun was over—or so it seemed.

While deals didn’t come to a screeching halt, their metrics changed dramatically during the course of the year. By November, the average global mergers and acquisitions deal size had shrunk 6 percent from the peak month of April, and the number of deals fell 11 percent, according to Dealogic.

In private equity, the numbers were even worse. Average deal size in November was down 68 percent from the peak month of May; the number of deals had fallen by half.

Despite the tough second half, there shouldn’t be any tears in dealmakers’ champagne glasses this New Year’s Eve. Total deal volume set a record in 2007—by the end of November, $4.5 trillion in global merger volume had been announced, up 28 percent from the same period in 2006, which itself was a record year.

 
Record volume and value were not the only hallmarks of the year, however. The natures of some 2007 deals will also leave their marks. Not all of Portfolio.com’s Deals of the Year were successful, but all are memorable.

 

CHRYSLER: Best Scramble to Save Face
Just when the hedge fund Cerberus Capital appeared poised to close on its acquisition of troubled carmaker Chrysler, the credit markets began to shut down. When investors balked at the financing terms for the $20 billion deal at the 11th hour, Wall Street came to the rescue. A group of banks led by J.P. Morgan Chase agreed to take on $10 billion of the debt, in what may well be Wall Street’s last big favor for a while.

ABN AMRO: Best Bidding War
Barclays Bank made the first bid—at $85 billion—for ABN Amro back in April. By October, the British bank admitted defeat to a trio of European banks led by the Royal Bank of Scotland. The final price tag: $101 billion, a record for the banking industry.

SALLIE MAE: Most Likely to End in a Nasty Courtroom Battle
When a group of buyers led by J.C. Flowers walked away from its $25 billion offer for Sallie Mae, the private equity world went into a tizzy over three little words: material adverse change. Now it seems that the student lender, run by the tenacious Albert Lord, will stop at nothing to ensure that Flowers and Company pay up. The buyers will need to prove that a material change occurred at Sallie. Front-row seats at this courtroom battle will be tough to score.

EQUITY OFFICE PROPERTIES: Best Timing
It might take years before we know which buyer had the best timing this year, but as far as sellers go, it’s tough to beat Sam Zell’s unloading of his Equity Office Properties for a steep premium mere months before the world collapsed. In February, Blackstone won an intense bidding war for the commercial property giant with its $39 billion bid, which was $3 billion higher than when it started.

TRIBUNE COMPANY: Most Daring, but Not for the Buyer
Zell may have struck gold with his real estate divestment, but the jury is still out on his highly complex arrangement to take the struggling Tribune Company private. He got the regulatory approval he needed, but it’s still far from certain whether Zell’s proposal to saddle a private Tribune with an estimated $13 billion of debt will ever pay off.

DOW JONES: Best Strategic Acquisition with the Least Financial Sense
If newspaper stocks are seen as risky investments at the moment, Rupert Murdoch did not get the memo. News Corp.’s Murdoch stunned the media world in May, not with his intention to acquire Dow Jones, but with his offer to pay $5 billion for it, an incredible 65 percent premium. Dow Jones searched high and low for another suitor willing to pay that price, without success. The Fox News parent officially added the venerable Wall Street Journal to its empire with a vote by Dow Jones shareholders on December 13.

TXU and FIRST DATA: Best Closings in the Nick of Time
Kohlberg Kravis Roberts earned the award for wrapping up two of the year’s biggest deals in the face of seemingly insurmountable obstacles. In late September, bankers for K.K.R.’s $26 billion takeover of First Data surprised many when they managed to find investors to pony up $9.4 billion of it. The very next week, they did it again. This time, they found takers for $7.5 billion to help finance the $45 billion takeover of the utility giant TXU.

STOCK EXCHANGES: Biggest Tide Shift
The New York Stock Exchange acquired Euronext. The Borse Dubai bought 28 percent of the London Stock Exchange, leaving the Nasdaq able to take over the Nordic exchange OMX. The deals this year made it official: Stock exchanges know no borders.

SOVEREIGN FUNDS: Biggest Sign of Things to Come
With the rising price of oil, Middle Eastern governments have found themselves brimming with cash. And in China, the booming economy has resulted in a $200 billion investment fund. This year, plenty of that sovereign money ended up in equity stakes of some major U.S. companies, such as Citigroup, A.M.D., and Blackstone. Not everyone is happy about it, but the place for sovereign funds in corporate America only has room to grow.

CLEAR CHANNEL: Biggest “I Can’t Believe It Still Hasn’t Closed” Deal
Thomas H. Lee Partners and Bain Capital Partners inked a deal to take Clear Channel Communications private for $19 billion on November 16, 2006, when the stock price of the media conglomerate was $35.36. It took 10 months to come up with the terms necessary to earn a nod from shareholders. Clear Channel now trades for around $35 and the latest news on the buyout is that it will close “later than expected,” probably in the first quarter of 2008. Will good things come to those who waited?