Author Archives: michael

Investment Banking Deals Improved 16%

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Announced M&A volumes of $24.3 billion improved by 16% from the prior week. In 3Q12, announced M&A volumes averaged 11% below the 2Q12 weekly average level and 14% below the 3Q11 average weekly level.

Sandler O’Neill’s Weekly M&A Trends:

Equity markets declined for the second week in a row

  • The S&P 500 declined by 1.3% in the week and the Russell 2000 growth index declined by 2.0% in the week. In 3Q12, the S&P 500 rose by 5.8% while the Russell 2000 index improved by 4.7%.
  • Average daily U.S. equity trading volumes declined by 5.2% from the prior week. In 3Q12, volumes averaged 13% below the 2Q12 weekly average and 32% 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 $5.2 billion in the week according to ICI data (on a one week lag). Equity mutual funds experienced $40.8 billion of net outflows in 3Q12 after experiencing net outflows of $22 billion in 2Q12 and $80.7 billion of net outflows in 3Q11. 3Q12 experienced the highest level of net outflows from equity mutual funds since the $64.1 billion of net outflows seen in 4Q11.
  • Volatility, measured by the average CBOE VIX, increased by 8.9% to 15.4, and the DB currency VIX declined by 0.7% to 8.04.

Both announced and completed M&A improved but remain light while equity and debt underwriting were solid on the week

  • Equity underwriting volumes of $19.4 billion improved by 21% from the prior week. In 3Q12, equity underwriting volumes averaged 17% above both the 2Q12 weekly average level and the 3Q11 average weekly level. The week was highlighted by Santander Mexico Financial Group’s $2.9 billion IPO, which priced on September 26 and has returned over 13% through Monday. According to Nasdaq, there are eight IPO’s set to price this week, the largest of which is Berry Plastics Group Inc.’s $608.8 million IPO, which is set to price on October 4.
  • Corporate debt underwriting volumes of $61 billion declined by 37% from last week’s relatively elevated level. In 3Q12, corporate debt underwriting volumes averaged 36% above the 2Q12 weekly average level and 90% above the 3Q11 weekly average level.
  • Announced M&A volumes of $24.3 billion improved by 16% from the prior week. In 3Q12, announced M&A volumes averaged 11% below the 2Q12 weekly average level and 14% below the 3Q11 average weekly level.
  • Completed M&A volumes of $24.7 billion improved by 32% from the prior week. In 3Q12, completed M&A volumes averaged 20% below the 2Q12 weekly average level and 4% below the 3Q11 average weekly level.

Credit spreads widened on lighter volume

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) widened (deteriorated) by 25 bps in the week to 548 bps. After widening (deteriorating) by 62 bps in 2Q12, the spread tightened (improved) by 62 bps in 3Q12.
  • The CDX investment grade index (IG18) widened (deteriorated) by 3 bps in the week to 90 bps. After widening (deteriorating) by 26 bps in 2Q12, the index tightened (improved) by 22 bps in 3Q12.
  • The Markit iTraxx 5-year SovX Western Europe Index, which tracks Western European sovereign debt CDS (cost of insuring against default), rose (deteriorated) by 12% in the week, but has declined (improved) in fifteen of the prior seventeen weeks. While the index rose (deteriorated) by 5% in 2Q12, the index declined (improved) 48% in 3Q12.
  • Daily average bond trading volumes declined by 3% from the prior week. In the week, average investment grade bond volumes declined by 1%, average high yield bond volumes declined by 8%, and average convertible bond volumes increased by 10%. 3Q12 total bond volumes averaged 5% below the 2Q12 weekly average and were flat with the 3Q11 weekly average.
  • The AAA ABX-HE declined by 4% in the week and the CMBX declined by 0.4% in the week.
  • The trade-weighted U.S. Dollar Index (DXY) rose by 0.8% in the week and the Commodity Research Board Index (CRB) rose by 0.1%.
  • 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 27 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.

Mergers & Acquisition Dealflow Declines -49%

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Announced M&A volumes of $19.2 billion declined by 49% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 10% below the 2Q12 weekly average level and 13% below the 3Q11 average weekly level.

Sandler O’Neill’s Weekly M&A Trends:

Equity markets pulled back modestly on lighter trading volume

  • The S&P 500 declined by 0.4% in the week and the Russell 2000 growth index declined by 0.8% in the week. In 3Q12, the S&P 500 has risen by 7.2% while the Russell 2000 index has improved by 6.8%.
  • Average daily U.S. equity trading volumes declined by 5.1% from the prior week. Thus far in 3Q12, volumes are averaging 13% below the 2Q12 weekly average and 32% 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 $3.3 billion in the week according to ICI data (on a one week lag). Equity mutual funds have experienced $35.5 billion of net outflows thus far 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, declined by 8.2% to 14.1, and the DB currency VIX was essentially flat at 8.1.

Debt underwriting was again a highlight in the week while completed M&A volumes also improved

  • Equity underwriting volumes of $15 billion declined by 61% from the prior week, though last week’s volumes were boosted by the Treasury’s $20 billion offering of AIG stock. Thus far in 3Q12, equity underwriting volumes are averaging 13% above both the 2Q12 weekly average level and the 3Q11 average weekly level. Positively, five IPO’s priced in the week with Trulia, Inc.’s $102 million offering highlighting the week, returning over 40% on its first day of trading.
  • Corporate debt underwriting volumes of $90.2 billion declined 20% from last week’s elevated level. Thus far in 3Q12, corporate debt underwriting volumes are averaging 35% above the 2Q12 weekly average level and 89% above the 3Q11 weekly average level.
  • Announced M&A volumes of $19.2 billion declined by 49% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 10% below the 2Q12 weekly average level and 13% below the 3Q11 average weekly level.
  • Completed M&A volumes of $17.9 billion improved by 68% from the prior week. Thus far in 3Q12, completed M&A volumes are averaging 20% below the 2Q12 weekly average level and 5% below the 3Q11 average weekly level.

Credit spreads widened as volume slowed modestly

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) widened (deteriorated) by 13 bps in the week to 523 bps. After widening (deteriorating) by 62 bps in 2Q12, the spread has tightened (improved) by 88 bps thus far in 3Q12.
  • The CDX investment grade index (IG18) widened (deteriorated) by 4 bps in the week to 87 bps. After widening (deteriorating) by 26 bps in 2Q12, the index has tightened (improved) by 25 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 23% in the week, and has declined (improved) in fifteen of the prior sixteen weeks. While the index rose (deteriorated) by 5% in 2Q12, the index has declined (improved) 53% thus far in 3Q12.
  • Daily average bond trading volumes declined by 4% from the prior week. In the week, average investment grade bond volumes declined by 3%, average high yield bond volumes declined by 3%, and average convertible bond volumes declined by 20%. 3Q12 total bond volumes are averaging 7% below the 2Q12 weekly average and 1% below the 3Q11 weekly average.
  • The AAA ABX-HE rose by 0.1% in the week and the CMBX declined by 0.5% in the week.
  • The trade-weighted U.S. Dollar Index (DXY) rose by 0.6% in the week and the Commodity Research Board Index (CRB) declined by 3.7%.
  • The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, tightened (improved) by 2 bps in the week to 27 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.

Mergers and Acquisitions Volumes Down 60%

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Announced M&A volumes of $16.6 billion declined by 60% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 9% below the 2Q12 weekly average level and 12% below the 3Q11 average weekly level.

Sandler O’Neill’s Weekly M&A Trends:

The S&P 500 had its best week since early June

  • The S&P 500 rose by 2.2% in the week and the Russell 2000 growth index rose by 3.7% in the week. In 3Q12, the S&P 500 has risen by 5.6% while the Russell 2000 index has improved by 5.4%.
  • Average daily U.S. equity trading volumes rose by 34% from the prior week. Thus far in 3Q12, volumes are averaging 15% below the 2Q12 weekly average and 34% 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 $4.4 billion in the week according to ICI data (on a one week lag). Net outflows from equity mutual funds totaled $22.9 billion in August, the highest monthly amount experienced since the $32.8 billion of net outflows experienced in December 2011. Equity mutual funds have experienced $29 billion of net outflows thus far 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, declined by 3.6% to 16.4, and the DB currency VIX declined by 10.9% to 8.2.

Debt underwriting had its best week since May 2011 and equity underwriting also improved significantly while M&A activity was quite light

  • Equity underwriting volumes of $17.2 billion more than tripled from the prior week. Thus far in 3Q12, equity underwriting volumes are averaging 12% below both the 2Q12 weekly average level and the 3Q11 average weekly level. Notable deals in the week included ING’s $3 billion offering of its shares in Capital One and A.I.G.’s $2 billion offering of its shares in the A.I.A. Group.
  • Corporate debt underwriting volumes of $98 billion nearly tripled from the prior week. Thus far in 3Q12, corporate debt underwriting volumes are averaging 19% above the 2Q12 weekly average level and 67% above the 3Q11 weekly average level.
  • Announced M&A volumes of $16.6 billion declined by 60% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 9% below the 2Q12 weekly average level and 12% below the 3Q11 average weekly level.
  • Completed M&A volumes of $11.9 billion improved by 13% from the prior week. Thus far in 3Q12, completed M&A volumes are averaging 15% below the 2Q12 weekly average level and 1% below the 3Q11 average weekly level.

Credit spreads tightened and volume picked up as the summer doldrums came to an end

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) tightened (improved) by 26 bps in the week to 555 bps. After widening (deteriorating) by 62 bps in 2Q12, the spread has tightened (improved) by 56 bps thus far in 3Q12.
  • The CDX investment grade index (IG18) tightened (improved) by 9 bps in the week to 93 bps. After widening (deteriorating) by 26 bps in 2Q12, the index has tightened (improved) by 19 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 18.3% in the week, and has declined (improved) in thirteen of the prior fourteen weeks. While the index rose (deteriorated) by 5% in 2Q12, the index has declined (improved) 33% thus far in 3Q12.
  • Daily average bond trading volumes rose by 57% from the prior week. In the week, average investment grade bond volumes rose by 41%, average high yield bond volumes rose by 106%, and average convertible bond volumes rose by 56%. 3Q12 total bond volumes are averaging 12% below the 2Q12 weekly average and 7% below the 3Q11 weekly average.
  • The AAA ABX-HE was rose by 2.8% in the week and the CMBX rose by 0.4% 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 0.7%.
  • The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, tightened (improved) by 4 bps in the week to 31 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.

M&A Dealflow Declined 12% to $39.8 billion

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Announced M&A volumes of $39.8 billion declined by 12% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 4% below the 2Q12 weekly average level and 7% below the 3Q11 average weekly level.

Sandler O’Neill’s Weekly M&A Trends:

The S&P 500 declined for the second consecutive week but ended positive for the month

  • The S&P 500 declined by 0.3% in the week and the Russell 2000 growth index rose by 0.5% in the week. In 3Q12, the S&P 500 has risen by 3.3% while the Russell 2000 index has improved by 1.7%.
  • Average daily U.S. equity trading volumes declined by 10.3% from the prior week. Thus far in 3Q12, volumes are averaging 16% below the 2Q12 weekly average and 34% 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 $5.9 billion in the week according to ICI data (on a one week lag). Net outflows from equity mutual funds totaled $18.4 billion in August, the highest monthly amount experienced since the $32.8 billion of net outflows experienced in December 2011. Equity mutual funds have experienced $24.6 billion of net outflows thus far 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 13.2% to 17.0, and the DB currency VIX rose by 5.5% to 9.2.

Investment banking volumes were soft across the board as activity slowed as expected heading into the holiday weekend

  • Equity underwriting volumes of $4.5 billion decreased by 45% from the prior week. Thus far in 3Q12, equity underwriting volumes are averaging 18% below both the 2Q12 weekly average level and the 3Q11 average weekly level.
  • Corporate debt underwriting volumes of $30.8 billion declined by 15% from the prior week. Thus far in 3Q12, corporate debt underwriting volumes are averaging 9% above the 2Q12 weekly average level and 52% above the 3Q11 weekly average level.
  • Announced M&A volumes of $39.8 billion declined by 12% from the prior week. Thus far in 3Q12, announced M&A volumes are averaging 4% below the 2Q12 weekly average level and 7% below the 3Q11 average weekly level.
  • Completed M&A volumes of $8.9 billion declined by 57% from the prior week. Thus far in 3Q12, completed M&A volumes are averaging 9% below the 2Q12 weekly average level and 6% above the 3Q11 average weekly level.

Credit markets deteriorated on lighter volume

  • The Merrill Lynch high yield corporate bond spread (Merrill Lynch High Yield Corporate Bond Index less the 10-year treasury) widened (deteriorated) by 17 bps in the week to 580 bps. After widening (deteriorating) by 62 bps in 2Q12, the spread has tightened (improved) by 30 bps thus far in 3Q12.
  • The CDX investment grade index (IG18) widened (deteriorated) by 1 bp in the week to 102 bps. After widening (deteriorating) by 26 bps in 2Q12, the index has tightened (improved) by 10 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 1.5% in the week, and has declined (improved) in twelve of the prior thirteen weeks. While the index rose (deteriorated) by 5% in 2Q12, the index has declined (improved) 18% thus far in 3Q12.
  • Daily average bond trading volumes declined by 18% from the prior week. In the week, average investment grade bond volumes declined by 14%, average high yield bond volumes declined by 26%, and average convertible bond volumes declined by 32%. 3Q12 total bond volumes are averaging 14% below the 2Q12 weekly average and 9% below the 3Q11 weekly average.
  • The AAA ABX-HE was flat in the week and the CMBX rose by 0.3% in the week.
  • The trade-weighted U.S. Dollar Index (DXY) declined by 0.5% in the week and the Commodity Research Board Index (CRB) rose by 1.2%.
  • The TED spread (3-month U.S. Treasuries vs. 3-month LIBOR), which is an indicator of perceived default risk, widened (deteriorated) by 1 bp in the week to 35 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.

Investment Banking M&A Volumes Up 15%

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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.
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.