M.&A. to Hit $3 Trillion in 2011, Report Says

By EVELYN M. RUSLI, NYT DealBook, November 15, 2010
The recent rebound in mergers and acquisitions is expected to strengthen significantly next year, according to a new report, with global deal activity on track to rise 36 percent, to $3.04 trillion.
The total would be the highest amount since 2007, when the market logged $4.28 trillion in deals in the months that preceded the financial crisis.
A widespread surge in confidence will power the rally, according to the report, a joint project by Thomson Reuters and Freeman Consulting Services that included interviews with 150 executives from a broad swath of industries.
“Respondents in every sector are forecasting increased mergers and acquisitions for 2011,” Matthew Toole, Thomson Reuters’ director of deals intelligence, said in an interview. “Capital markets activity will also continue to be robust, with increased corporate bond issuance and syndicated lending, driven by refinancing activity.”
The numbers tell the story.
The totals are far from levels before the recession, when leveraged buyouts frequently fetched multiples of 15 times earnings before interest, tax, depreciation and amortization, but the appetite for deals is gaining momentum despite lingering concerns in the credit markets.
After hitting a recent low in 2009, with $1.98 trillion in deals, the volume of mergers and acquisitions is expected to rise 12.6 percent this year, to $2.23 trillion, and pick up speed in 2011, according to the report.
On the equity capital markets side, activity is forecast to rise 21 percent next year, to $920 million, while corporate bond issuance should gain 14 percent, to $1.28 trillion.
The report also predicted that two sectors would shine in 2011 for deals: real estate and financial firms. After being pummeled by the credit crisis, many companies from these industries will need to restructure their businesses, pursue consolidation, divest assets or simply play catch-up.
“Financials seem to be the most bullish on a percentage basis,” Mr. Toole said. “This year we saw Goldman Sachs divesting its prop trading desk. … Now we’ll see it on a fuller scale.”
Mr. Toole added that investors should also expect decent deal volume in the health care sector, where competition is driving mergers and acquisitions.