Mergers and acquisitions rose for the first year since 2007, potentially marking the start of a new, multiyear M&A cycle in which emerging economies account for a bigger share of global dealmaking.
Thomson Reuters data showed announced M&A grew nearly a fifth this year, to $2.25 trillion globally. The preliminary figures show emerging markets made up a record 17% of transactions, and energy was the busiest sector.
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Next year could be busier still. Executives, bankers, big investors such as Schroders, and analysts at banks including Credit Suisse, Nomura, and Societe Generale are among those predicting a further rise.
Cheap debt, record cash piles, the need to outpace sluggish economic growth, and positive market reactions to many deals in 2010 should embolden companies to strike more deals, they say.
"We feel M&A volumes will improve next year, there's certainly going to be more cross-border activity than ever, and Asia -- again -- will be a bigger part of the equation," said Scott Matlock, chairman of international M&A at Morgan Stanley (NYSE:MS).
Deutsche Bank, the world's fifth-busiest merger adviser, said next year could bring a bigger rise.
"The increase in M&A activity in 2011 should exceed that of 2010," said Henrik Aslaksen, Deutsche's global head of M&A.
"There's more confidence, there's ample liquidity, financing costs are attractive, and there's an intense focus amongst corporates to identify growth opportunities," he added. "The pipeline is very broad-based. It's not just confined to one to two sectors."
Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found.
That means 2011 could be the second of several years of rising deals -- earlier this year Citi analysts said the world was "in the foothills" of a new M&A cycle. These cycles typically last years: the last peaks came in 2000 and 2007.
Bankers say a combination of cheap stocks, as measured by price-to-earnings ratios, and even cheaper debt means many deals would offer a big boost to earnings.
The optimism comes despite a slower fourth quarter and the worst spate of withdrawn deals since the height of the credit crisis: two collapsed BHP Billiton deals, in Canada and Australia, alone cut $100 billion from M&A volumes.
Jeffrey Kaplan, global head of M&A at Bank of America Merrill Lynch (BAC.N), said it was still "challenging to get deals done," despite "good momentum going into 2011 for both corporate and private equity activity."
With about a fortnight to go, Morgan Stanley is lagging archrival Goldman Sachs (GS.N), after beating it to the No. 1 ranking last year for the first time in 13 years.
Goldman Sachs, under M&A head Gordon Dyal, has advised on $513.1 billion of deals to Morgan Stanley's $499.5 billion.
Emerging markets deals hit a record $378 billion, while developed markets lagged. Global M&A increased 19%, while U.S. M&A rose 11% and activity in Europe climbed 5%.
Colin Banfield, Citigroup's (C.N) head of M&A for Asia-Pacific, said currency rates were aiding the region's companies, which were growing "more ambitious" and contemplating bigger deals.
But aside from several major telecommunications tie-ups in the developing markets, and the odd banner deal such as Chinese carmaker Geely's purchase of Volvo from Ford, many deals from newer markets were aimed at securing resources or technologies.
"We're still in the early days of emerging markets M&A," said Matlock at Morgan Stanley."When it gets really hot is when people decide they want to buy and build truly global multinational corporations, and we're not there yet. It's more focused on acquiring natural resources or on opportunistic deals."
Energy and power was the year's busiest sector, with a near-40% rise in announced deals to $482 billion, followed by the financial and basic materials sectors.
Asian companies including China's Sinopec Corp and Thailand's PTT Exploration and Production struck deals that ranged from buying stakes in oil fields to Korea National Oil Corp's hostile takeover of Britain's Dana Petroleum.
"Asian players, led by China, are making a land-grab for resources to fuel their economies for many years into the future," said Jeremy Wilson, co-head of natural resources at JPMorgan (NYSE:JPM).
A widely predicted European resurgence failed to occur as debt crises rattled the continent and forced Greece and Ireland to seek bailouts. European M&A rose 5% to $589 billion.
"All the right ingredients are in place for an upturn," said Philip Noblet, Merrill's co-head of M&A for Europe, the Middle East and Africa.
"But it could be another lost year for M&A in Europe if economic worries don't subside and chief executives don't regain the confidence to do deals. The outlook is very uncertain -- and people hate uncertainty when they are buying."