Big Deals (December 10)

Look for surge in M&A, underwritings in 2011.

By Marine Cole

As the end of the year is approaching, corporations are making their predictions for 2011 and it already looks like deal activity will be on the rise across the board.

Thomson Reuters recently conducted a survey of corporate decision makers and found these respondents expect an uptick of 36 percent in global mergers and acquisitions in 2011, mostly driven by financial services companies and real estate. They see more than $3 trillion in activity in 2011, compared with $2.2 trillion in announced M&A transactions in 2010. They reckon emerging Asian countries and North America will see the bulk of transactions.

Technology companies said that few bidders in the market will keep the pace and price of acquisitions reasonable, underscored recently when the bidding for 3Par by Hewlett-Packard and Dell resulted in a four-week premium of 244 percent.

Respondents to the Thomson Reuters survey were also optimistic about capital markets, seeing equity IPOs and secondary offerings increasing by 21 percent in 2011 to almost $1 trillion, mostly driven by industrial and technology companies.

They expect corporate bond activity to increase by 14 percent to $1.28 trillion, driven by industrial and technology companies.

Half of surveyed companies agree that initial public offerings will be a more attractive exit option for growth-stage companies than M&A, but it remains to be seen whether this is also the most realistic option.

CFOs, especially those working for mid-market companies, also are gaining confidence about the economy and prospects for growth, which has already boosted M&A activity so far this year.

In the first 11 months of the year, there were 10,205 deals worth $226.3 billion in the Americas. This was down from the 10,500 deals announced in the first 11 months of last year. However, the total volume far exceeds last year’s total of $162.6 billion during the first 11 months of the 2009, according to data provided by Thomson Reuters. This suggests the average size of deals is swelling.

In November, however, deal activity fell for the second straight month compared to the same period last year. The total value for November was $19.4 billion, a decrease of 5.5 percent compared to the $20.5 billion of deals announced in November 2009.

In the US, there were 429 transactions valued at $13.5 billion in November.

Mid-market CFOs are also more upbeat about their companies' access to credit, according to a third-quarter survey released last month by GE Capital. The survey found that as liquidity is improving, 75 percent of the more than 500 CFOs surveyed expect their company's cost of capital to improve or remain stable. This is up from 60 percent in January.

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