M&A surges, but it may not last

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Companies finally may be getting the message that it's better to invest in the future.

After years of lackluster growth, mergers and acquisitions have taken off in 2015, thanks in good part to a blockbuster May that marked the second best month ever for deals involving U.S. companies, according to S&P Capital IQ. The $234 billion in announcements for the month included several multibillion dollar M&A moves, most notably the $78.4 billion bid by Charter Communications to acquire Time Warner Cable (a deal that likely will face substantial regulatory scrutiny).

Activity has gotten so intense that some on Wall Street are fighting against the notion that a bubble is forming. Total U.S. activity for the year is at $747 billion, a 52 percent increase over the same period in 2014, according to Thomson Reuters.

"Should we be worried that M&A activity is approaching the levels it hit in 2007, just ahead of the financial crisis?" Jeffrey Kleintop, chief global investment strategist at Charles Schwab, asked in a report. "We think not. The composition of deals today is much less concentrated in one hot sector than it was eight years ago, suggesting a more balanced environment less prone to inflating a bubble."

S&P Capital IQ also researched the six previous months when M&A eclipsed $200 billion and found little concrete bubble indications—the advanced and declined three times each in the ensuing 12-month period.

However, not everyone is popping the corks for a robust MA& outlook.