M&A Activity Spiked Increasing 65% [Weekly M&A Trends]

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Announced M&A volumes of $57.6 billion increased 65% from the prior week. AB-InBev’s $20.1 billion acquisition of the remaining share of Grupo Modelo that it did not already own and Bristol-Myers Squibb’s acquisition of Amylin Pharmaceuticals in a deal valued at $7 billion.

Sandler O’Neill’s Weekly M&A Trends:

Equity markets rallied in the week but ended the quarter in negative territory

  • The S&P 500 rose by 2.0% and the Russell 2000 growth index rose by 3.0% in the week. In 2Q12, the S&P 500 declined by 3.3% and the Russell 2000 growth index declined by 4.1%.  
  • Average daily U.S. equity trading volumes declined 10.6% in the week. 2Q12 volumes were flat with the 1Q12 weekly average. Average daily U.S. volumes reflect the total number of shares traded on Tape A, Tape B, and Tape C in millions.
  • Equity mutual funds experienced net outflows of $1.5 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 four weeks, after being negative in twelve of the prior thirteen weeks. Equity mutual funds experienced net outflows of $20.9 billion in 2Q12 with one week of data yet to be reported. This is more than double the amount of net outflows experienced in 1Q12, but below the $80.7 billion net outflows in 3Q11.
  • Volatility, measured by the average CBOE VIX, rose by 4.6% to 19.3, and the DB currency VIX declined by 4.8% to 9.7.

Investment banking improved as announced M&A was a highlight

  • Equity underwriting volumes of $10.8 billion improved by 25% from the prior week’s level. 2Q12 equity underwriting volumes averaged 22% below the 1Q12 weekly average level. The week was highlighted by ServiceNow Inc.’s IPO, which rose 37% on Friday during it’s first day of trading. Four IPO’s priced in the week, marking the most active week for U.S. IPO’s since the Facebook offering in mid-May.
  • Corporate debt underwriting volumes of $51.6 billion declined by 11% from the prior week. 2Q12 corporate debt underwriting volumes averaged 35% below the seasonally strong 1Q12 weekly average.
  • Announced M&A volumes of $57.6 billion improved by 65% from the prior week. 2Q12 announced M&A volumes averaged 5% above the 1Q12 weekly average. The week was highlighted by two acquisitions on Friday: AB-InBev’s $20.1 billion acquisition of the remaining share of Grupo Modelo that it did not already own and Bristol-Myers Squibb’s acquisition of Amylin Pharmaceuticals in a deal valued at $7 billion. The M&A market was also relatively active last night and this morning, with four deals with values of at least $2 billion were announced.
  • Completed M&A volumes of $43.7 billion improved by 19% from the prior week. 2Q12 completed M&A volumes averaged 25% above the 1Q12 weekly average.

FICC markets strengthened to close out the quarter

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) tightened (improved) by 8 bps in the week to 611 bps. In 2Q12, the index widened (deteriorated) by 62 bps.
  • The CDX investment grade index (IG18) tightened (improved) by 3 bps in the week to 112 bps. The index widened (deteriorated) by 26 bps in 2Q12.  
  • The Markit iTraxx 5-year SovX Western Europe Index, which tracks Western European sovereign debt CDS (cost of insuring against default), declined (improved) by 4.4% in the week, marking the fourth consecutive week of improvement. While the index rose (deteriorated) by 5% in 2Q12, the index declined (improved) by 14% in June alone, after rising (deteriorating) by 20% in May.
  • Daily average bond trading volumes were flat from the prior week but averaged 14% below the seasonally strong 1Q12 in the quarter. In the week, average investment grade bond volumes improved by 5%, average high yield bond volumes declined by 15%, and average convertible bond volumes improved by 20%.
  • The AAA ABX-HE rose by 1.4% and the CMBX rose by 0.7% in the week.
  • The trade-weighted U.S. Dollar Index (DXY) declined by 0.4% in the week while the Commodity Research Board Index (CRB) rose by 6.1%.
  • The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, declined (improved) by 1 bp in the week to 38 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.
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