Announced M&A volumes of $43 billion improved by 15% from the prior week and have improved in each of the prior three weeks. Thus far in 3Q12, announced M&A volumes are averaging 5% below the 2Q12 weekly average level and 9% below the 3Q11 average weekly level.
Sandler O’Neill’s Weekly M&A Trends:
The S&P 500 declined after six consecutive weeks of gains
- The S&P 500 declined by 0.5% in the week and the Russell 2000 growth index declined by 1.3% in the week. In 3Q12, the S&P 500 has risen by 3.6% while the Russell 2000 index has improved by 1.2%.
- Average daily U.S. equity trading volumes improved by 1.2% from the prior week. Thus far in 3Q12, volumes are averaging 14% below the 2Q12 weekly average and 33% below the 3Q11 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 $3.2 billion in the week according to ICI data (on a one week lag). In total, equity mutual funds have experienced $19.5 billion of net outflows in 3Q12 after experiencing net outflows of $22 billion in 2Q12 and $80.7 billion of net outflows in 3Q11.
- Volatility, measured by the average CBOE VIX, rose by 6.2% to 15.1, and the DB currency VIX decreased by 3.2% to 8.7.
Investment banking volumes were mediocre on the week amidst the summer doldrums
- Equity underwriting volumes of $10.7 billion increased by over 70% from the prior week. However, over 80% of the total volume in the week was the result of a $9 billion private placement by Bank of Communications in China in order to help meet the country’s capital requirements. Excluding this deal, equity underwriting volumes of $1.8 billion declined 70% from the prior week. Thus far in 3Q12, equity underwriting volumes are averaging 10% below the 2Q12 weekly average level and 9% below the 3Q11 average level.
- Corporate debt underwriting volumes of $33.5 billion declined by 44% from the prior week. Thus far in 3Q12, corporate debt underwriting volumes are averaging 13% above the 2Q12 weekly average level and 58% above the 3Q11 weekly average level.
- Announced M&A volumes of $43 billion improved by 15% from the prior week and have improved in each of the prior three weeks. Thus far in 3Q12, announced M&A volumes are averaging 5% below the 2Q12 weekly average level and 9% below the 3Q11 average weekly level. In addition, a flurry of deals were announced this morning, including: M&T Bank’s acquisition of Hudson City Bancorp for $3.7 billion, Hertz’s acquisition of Dollar Thrifty for $2.3 billion, IBM’s acquisition of Kenexa for $1.3 billion, Thomas Bravo’s agreement take Deltek private for $1.1 billion and First Reserve Corporation and SK Capital Partners’ agreement to take TPC Group private for $850 million.
- Completed M&A volumes of $14.3 billion declined by over 60% from the prior week. Thus far in 3Q12, completed M&A volumes are averaging 3% below the 2Q12 weekly average level and 12% above the 3Q11 average weekly level.
Credit market trends were mixed on light volume
- The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) widened (deteriorated) by 3 bps in the week to 563 bps. After widening (deteriorating) by 62 bps in 2Q12, the spread has tightened (improved) by 47 bps thus far in 3Q12.
- The CDX investment grade index (IG18) widened (deteriorated) by 1 bp in the week to 101 bps. After widening (deteriorating) by 26 bps in 2Q12, the index has tightened (improved) by 11 bps in 3Q12 QTD.
- The Markit iTraxx 5-year SovX Western Europe Index, which tracks Western European sovereign debt CDS (cost of insuring against default), declined (improved) by 2.2% in the week, and has declined (improved) in eleven of the prior twelve weeks. While the index rose (deteriorated) by 5% in 2Q12, the index has declined (improved) 17% thus far in 3Q12.
- Daily average bond trading volumes declined by 11% from the prior week. In the week, average investment grade bond volumes declined by 5%, average high yield bond volumes declined by 23%, and average convertible bond volumes improved by 17%. 3Q12 total bond volumes are averaging 11% below the 2Q12 weekly average and 6% below the 3Q11 weekly average.
- The AAA ABX-HE declined by 0.4% and the CMBX declined by 0.2% in the week.
- The trade-weighted U.S. Dollar Index (DXY) declined by 1.2% in the week and the Commodity Research Board Index (CRB) rose by 0.8%.
- The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, tightened (improved) by 3 bps in the week to 33 bps. The TED spread remains materially below the 464 bps reached during the peak of the 08-09′ credit crisis.