Global mergers and acquisitions volume advanced by a record $1.67 trillion in the second-quarter, Dealogic reports.
With $2.78 trillion deals announced year to date, volume is up 51% from last year, despite a 6% drop in activity. Finance leads with $540.6 billion deals announced year to date, followed by real estate’s $301.3 billion and utility & energy’s $254.86. Technology is the most active industry with 2,027 deals announced year to date.
Meanwhile, U.S. targeted M&A surpassed $1 trillion Wednesday, up 36% from last year. April 2007 was the biggest month ever for M&A volume, hitting $2 trillion the first week of May. However, June saw a slide in both global and domestic deal activity.
Strong Run For Credit Market
The credit market has also had a strong run so far this year, with global corporate bond issuance, for both high-yield and investment grade, up around 30% in the first half from the same period a year ago.
Overall, global debt capital market (DCM) deals are up 11% in the first half of 2007, compared with the first six months of last year, totaling $3.7 trillion, according to data compiled by Dealogic.
That shows just how resilient investor risk appetite has been against a global stock selloff in February, prompted by a fall in Chinese stocks, and more recent volatility related to renewed concerns about the risky U.S. subprime market.
And even if market conditions become more volatile in the months ahead, as many analysts expect, there is still likely to be plenty of demand for the right deal at the right price, despite the current wobble.
"We're not seeing investors taking their money and run, so it doesn't look like something that will last a long time," said Raja Visweswaran, credit strategist at Bank of America.
In Europe, investment-grade and high-yield issuance surged 26% and 32%, respectively, with the likes of Italian power company Enel pulling off a deal worth 5 billion euros (US$6.72 billion), the biggest in 18 months, just this month.
One supporting factor for borrowers, analysts say, is that spreads have held very close to historically tight levels, even when taking the latest wobbles into account. Corporate earnings have also held steady, and the global economic outlook looks bright, with previous expectations of a U.S. Federal Reserve rate cut later this year looking increasing unlikely.
What appears to be changing, however, is not liquidity, the amount of money looking for a home, but the mood of investors, who are being more selective where to put their cash.
"Underlying credit quality isn't going to change, and the fundamental supply-demand imbalance isn't going to change," said Michael Ridley, JP Morgan's global co-head of high grade debt capital markets and syndicate. "We are still finding that when investors want to buy any transaction, there is still a multiple of the cash needed to drive it."
Americas, Europe Lead The Pack
Of the $1.26 trillion global investment-grade deals done since January, $626 billion were in the European, Middle East and Africa (EMEA) region, and $502 billion in the Americas. The latter was a 36 percent increase on the period from January to end-June 2006.
In terms of size, Asia Pacific and Japan trailed behind, but still saw a 26% and 42% respective jump in deals.
The Americas accounted for the vast majority of high-yield deals too, with a 40% jump in the value of issuance to $109 billion, followed by EMEA, where deal values rose to $48 billion.
The road ahead may be slightly tougher as investors seek reassurance that they are being compensated enough for risk.
Arcelor Finance is just one of several companies that have been forced to pull deals this year because of market volatility. Procter & Gamble and Italy's Fiat, the latter recently raised to investment grade by Fitch Ratings, took two attempts to sell deals after their initial plans were
"Investors have actually have taken a step back and are thinking to themselves, 'I still like the risk, but am I being paid adequately for it?'," said Ridley. "That is going to be the theme on a transaction-by-transaction basis for the next three or four months."
Global asset and mortgage-backed securities were also dominated by the Americas, which generated $1 trillion of them, though that was down 4% from the first half of 2006. EMEA saw the strongest pick-up, with a 39% rise in issuance to almost $311 billion.