M&A Activity Picks Up Despite Shutdown: Goldman

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Mergers and Acquisitions have been slow through 2013. Despite what appears to be an ideal situation for big deals to take place, and some major deals being announced, levels of M&A activity are still below what analysts expect given the state of the market. It appears that businesses are unwilling to take on debt to make deals.

Last week saw an uptick in mergers and acquisitions, according to a new report from Goldman Sachs Group Inc (NYSE:GS). The capital markets monitor, the authorship of which was led by analyst Alexander Blostein, records last week as a strong one for M&A activity.

M&A activity problems

According to the Goldman Sachs Group Inc (NYSE:GS) report, M&A activity on announcements and acquisitions was up in the last week. The investment bank records an increase of 46 percent in announcements and 15 percent in completions week on week. The move does not mean that the M&A market has recovered from the slow-down through the year, but it does indicate an increased willingness to get involved in M&A.

Goldman Sachs Group Inc (NYSE:GS) M&A fee backlog decreased by a small amount week on week, but the company says it still remains strong at $6.5 billion. The Goldman decrease in backlog was by no means the trend. Evercore Partners Inc. (NYSE:EVR) saw an increase of 12 percent in the number since the end of the third quarter.

The reasons behind the increase in activity are not entirely clear, but Federal Reserve policy and the end of the government shut-down are probably involved. Before announcing big, corporate structure-changing deals, companies like to be able to predict their cost, and the state of the economy on completion. With taper talk and debt ceiling debates going on, both of those things were hard to do, depressing M&A activity.

Capital markets report

The Goldman Sachs Group Inc (NYSE:GS) recorded many parts of the international capital market, and by no means concentrated on the uptick in M&A activity. The other important numbers contained in this report showed the strong market reaction to the U.S. debt deal, and a pick-up in investing in Europe. The report also mentioned some of the important firms reporting earnings in the coming week.

The end of debt ceiling talks and taper talk have brought stability to the market. The VOLATILITY S&P 500 (INDEXCBOE:VIX) is close to 13 today. That leaves some room for increased M&A activity, but nothing is certain.

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