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Increased Merger Activity Expected This Year

The headwinds that plagued the mergers and acquisitions business in 2011 are turning into favorable tailwinds for this year.

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“We have a market that is much less volatile than it was in 2011 and we’re seeing an upward bias in equity markets this year, which is positive for the M&A environment,” Andrew Bednar, partner at Perella Weinberg told CNBC. “We’re also seeing a wide open credit market and very low historic rates.”

While big merger deals signal confidence to investors, companies have been hesitant to pull the trigger on transactions due to ongoing fiscal woes in the U.S., debt worries in the euro zone and uncertainties over growth in Asia.

“People don’t quite trust this economy because it has too many externalities feeding up to it,” explained Bednar. “That is giving some people some pause about the foundation of the economy.”

Still, M&A volume has started to see a modest pickup in the first two months of 2012 after tapering off in the second half of last year.

In particular, biotechnology firms have been among the most activeM&A participants.

Most notably, Amgen announced in January it will acquire Micromet for $1.16 billionin an effort for the biotech giant to boost its oncology pipeline. Meanwhile, Celgene said it plans to purchase privately-held Avila Therapeutics for $925 million.

“I think the M&A market will continue to evolve,” said Bednar. “It is still going to include large-scale stock for stock mergers and cash acquisitions, but more and more, we’re seeing split-ups, split-offs, spin-offs and more complicated transactions.”

Earlier this week, Sears announced several moves to increase liquidity, including the sale of 11 stores to General Growth Properties for $270 million, and the spinoff of 1,250 Hometown and Outlet stores to shareholders.

“[The M&A market] will be a less plain vanilla and more complex.”

Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.