Mergers and acquisitions (M&A) rose for the first year since 2007, potentially marking the start of a new, multi-year M&A cycle in which emerging economies account for a bigger share of global dealmaking.
Thomson Reuters data showed announced M&A grew nearly a fifth this year, to $2,25 trillion globally.
The preliminary figures show emerging markets made up a record 17% of transactions, and energy was the busiest sector.
Next year could be busier still. Executives, bankers, big investors such as Schroders, and analysts at banks including Crédit Suisse, Nomura, and Société Génerale are among those predicting a further rise.
Cheap debt, record cash piles, the need to outpace sluggish economic growth, and positive market reactions to many deals in 2010 should embolden companies to strike more deals, they say.
“We feel M&A volumes will improve next year, there’s certainly going to be more cross-border activity than ever, and Asia, again, will be a bigger part of the equation,” said Scott Matlock, chairman of international M&A at Morgan Stanley.
Deutsche Bank, the world’s fifth-busiest merger advisor, said next year could bring a bigger rise.
“The increase in M&A activity in 2011 should exceed that of 2010,” said Henrik Aslaksen, Deutsche’s global head of M&A. “There’s more confidence, there’s ample liquidity, financing costs are attractive, and there’s an intense focus amongst corporates to identify growth opportunities,” he added.
“The pipeline is very broad-based. It’s not just confined to one to two sectors.”
Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found.
That means 2011 could be the second of several years of rising deals, earlier this year Citi analysts said the world was “in the foothills” of a new M&A cycle.
These cycles typically last years: the last peaks came in 2000 and 2007.
Bankers say a combination of cheap stocks, as measured by price-to-earnings ratios, and even cheaper debt means many deals would offer a big boost to earnings.
The optimism comes despite a slower fourth quarter and the worst spate of withdrawn deals since the height of the credit crisis: two collapsed BHP Billiton deals, in Canada and Australia, alone cut $100 billion from M&A volumes.
Jeffrey Kaplan, global head of M&A at Bank of America Merrill Lynch, said it was still “challenging to get deals done,” despite “good momentum going into 2011 for both corporate and private equity activity”.
With about a fortnight to go, Morgan Stanley is lagging archrival Goldman Sachs, after beating it to the No. 1 ranking last year for the first time in 13 years..