Investment Banking M&A Up 37% [Weekly M&A Trends]

Announced M&A volumes of $30.9 billion increased +37% from the prior week. So far quarter to date M&A volumes are averaging +6% above the first quarter of 2012.

Sandler O’Neill’s Weekly M&A Trends:

Equity markets were mixed in the week

  • The S&P 500 fell by 0.6% and the Russell 2000 growth index rose by 0.7% in the week. Quarter to date the S&P 500 has declined by 5.2% and the Russell 2000 growth index has declined by 6.9%.  
  • Average daily U.S. equity trading volumes were essentially flat in the week. Quarter to date volumes are flat with the 1Q12 average. Average daily U.S. volumes reflect the total number of shares traded on Tape A, Tape B, and Tape C in millions. Note: Data through Thursday, June 21.
  • Equity mutual funds experienced net inflows of $0.9 billion in the week according to ICI data (on a one week lag). Flows into equity funds have been positive in two of the previous three weeks, after being negative in twelve of the prior thirteen weeks.
  • Volatility, measured by the average CBOE VIX, declined by 18.3% to 18.4, and the DB currency VIX declined by 11.7% to 10.2.

Investment banking activity was generally light on the week

  • Equity underwriting volumes of $7.9 billion declined by 27% from the prior week’s level. Quarter to date, equity underwriting volumes are averaging 22% below the 1Q12 weekly average. In the upcoming week, there are four IPOs that may potentially price: ServiceNow, Inc., Tesaro, Inc., Exa Corp., and EQT Midstream Partners, L.P. Note: prior weeks are subject to revisions.
  • Corporate debt underwriting volumes of $55.2 billion declined by 1.9% from the prior week. However, quarter to date, corporate debt underwriting volumes are averaging 36% below the strong 1Q12 weekly average.
  • Announced M&A volumes of $30.9 billion improved by 37% from the prior week. Quarter to date, announced M&A volumes are averaging 6% above the 1Q12 weekly average.
  • Completed M&A volumes of $18.3 billion declined by 51% from the prior week. Quarter to date, completed M&A volumes are averaging 16% above the 1Q12 weekly average.

FICC markets improved on higher volume

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) tightened (improved) by 28 bps in the week to 619 bps. Quarter to date the index has widened (deteriorated) by 70 bps.
  • The CDX investment grade index (IG18) tightened (improved) by 2 bps in the week to 115 bps. Quarter to date the index has widened (deteriorated) by 29 bps.  
  • The Markit iTraxx 5-year SovX Western Europe Index, which tracks Western European sovereign debt CDS (cost of insuring against default), declined (improved) by 6.8% in the week but has risen by 10% QTD and increased by 20% in May alone.
  • Daily average bond trading volumes rose by 9% from the prior week but are averaging 14% below the seasonally strong 1Q12 average QTD. In the week, average investment grade bond volumes improved by 9%, average high yield bond volumes improved by 8%, and average convertible bond volumes declined by 1%.
  • The AAA ABX-HE rose by 2.1% and the CMBX rose by 0.6% in the week.
  • The trade-weighted U.S. Dollar Index (DXY) rose by 0.8% in the week while the Commodity Research Board Index (CRB) declined by 1.6%.
  • The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, was flat in the week at 39 bps. The TED spread remains materially below the 464 bps reached during the peak of the 08-09′ credit crisis.
Disclosure: I do not have a position in any stocks mentioned in this article, do not have a plan to initiate a position within the next 72 hours.
Disclaimer:  The information, opinions, material, and any other content provided in this article is for informational purposes only and is not to be used or considered an offer or solicitation to buy or sell securities, investment products, financial instruments, or to participate in any particular investment strategy. The information, opinions, material, and any other content provided in this article does not constitute as a recommendation or as advice to buy or sell securities, investment products,  financial instruments, or to participate in any particular investment strategy.



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