Mergers and Acquisitions (M&A) activity had solid growth in the second quarter of 2011, with EMEA in the double-digits, according to IntraLinks deal flow indicator.
Global activity was up 24 per cent year-on-year, which was consistent with key drivers such as an uncertain future over the state of sovereign debt. That has prompted companies to sell in fear of a less favourable economic climate or missing out on a fast rebound.
“The increase in M&A activity should help drive the demand for securities borrowing as arbitrage funds and investors look to exploit the imbalance in full-entity public company sales,” said Matt Porzio, vice president of product marketing at IntraLinks.
“However, this effect may be tempered as we saw a larger rise in private and divestiture deals as overall activity increased from two previous quarters of essentially flat sequential performance.”
Latin America had the greatest increase at 43 per cent quarter-on-quarter and 88 per cent year-on-year, large driven by growth in Brazil. There were also significant increases in manufacturing, energy and life sciences sectors compared to the previous quarter.
“As regions like Latin America and sectors like Energy and Life Sciences and Pharma showed significant growth in M&A activity in our Q2 Deal Flow Indicator, that will likely present opportunity for additional merger arbitrage and the associated securities lending as some of these deals become publicly announced in the next couple of months,” Porzio adds.
"Like stock lending, asset servicing should see demand for services grow in a market where corporate actions, proxy voting and custody changes will rise as M&A deal flow demonstrated a strong second quarter but tempered by a larger rise in private sales and divestiture deals as overall activity increased,” he said.