Courtesy of Thomson Reuters:
The value of worldwide mergers and acquisitions totals $309.6 billion through year-to-date 2011, a 69% increase over last year at this time and the strongest start for M&A since 2000, when the opening weeks of the year saw $554.2 billion in deal activity. Financials, materials and energy & power M&A account for 60% of this year’s total, compared to 2000 when media, telecommunications and healthcare M&A drove 70% of announced activity.
These figures are complete through Friday and therefore don’t include Danaher’s $5.8bn acquisition of Beckman Coulter, Santander’s $5.8bn offer to buy Polish Bank, or the less-pricy-but-more-interesting-to-us purchase of the Huffington Post Media Group and AOL for $315m.
And here’s a wider overview of investment banking activity:
Meanwhile, this sounds familiar:
Global high yield corporate debt for year-to-date 2011 totals $40.4 billion, a 61% increase over last year at this time. January marked the seventh consecutive month with over $20 billion in new high yield issuance, the longest stretch since records began in 1980. Issuers in the financial, energy & power and media & entertainment sectors account for more than half of this year’s activity.
The junk issuance boom continues.
In December, FT Alphaville attended several 2011 outlook meetings hosted by fixed income managers. All of them said they believed that we could see further tightening in junk bonds spreads (that is, an improvement in junk bonds relative to treasuries) — expecting that the asset class would perform better than government and investment grade debt in a rising rate environment.
There are valid reasons for this optimism, though the whole thing still makes us nervous. Defaults on high yield debt are extremely rare — none in January and the global default rate is down to 2.8 per cent, according to a report from Moody’s on Monday — and are expected to trend even lower this year.
Still, we’re sticking to what we wrote in January:
None of this negates the longer-term worries, such as the looming maturity wall in 2014, which Moody’s described in a prior report, or the indications that some junk-rated companies were poised to use their cash for M&A, dividends, and share buybacks — effectively undoing some of the balance sheet improvements of the last couple of years.
Maybe we’re wrong to still be nervous about the high yield debt boom that started last year, but that doesn’t mean we plan to stop keeping an eye on it.
Related links:
Shiny junk resists a funk – FT Alphaville
High yield – up against the wall, eventually – FT Alphaville