M&A activity ends
the year with sudden,
$85 billion roar

NEW YORK » It's almost as if it happened when we weren't looking. Initial public offerings and merger and acquisition activity quietly surged this year to levels not seen since 2000.

This past week alone, there were $85 billion in announced deals, including Sprint Corp.'s $35 billion acquisition of Nextel Communications Inc. It was the busiest week for M&A in four years. This should not be interpreted as an excuse to party like it's 1999, analysts warn, but in the near-term it's encouraging for stocks.

"It's a positive sign that shows confidence in the economy," said Richard Peterson, chief market strategist at Thomson Financial, who noted that this week's value exceeded the totals of some recent months. "It shows that companies are willing to spend money to buy other operations."

M&A activity has been slowly climbing back to pre-recession levels, with 7,700 deals so far this year valued at a total of $742 billion, according to Thomson Financial. The number of deals is up only modestly over last year, when there were 7,500, but their value has risen significantly, up from $543 billion in 2003.

At the M&A market peak in 2000, deal value came to $1.6 trillion. The total fell by more than half in 2001 to $743 billion and slumped further in 2002 to $429 billion, before picking up momentum last year.

In a further signal of rising corporate activity, 18 new companies were brought to market during the past week, the most IPOs in a single week since 26 companies went public during the week ending Aug. 11, 2000.

Shares of casino operator Las Vegas Sands Corp. surged more than 60 percent after its debut Wednesday, the best first-day performance for a U.S.-based IPO since JetBlue Airways Corp. gained 67 percent in May 2002.

"IPOs are a vote of confidence in the stock market. They show investors are willing to put new money to work in unseasoned equities," said Kathleen Smith, an analyst with IPO research firm Renaissance Capital in Greenwich, Conn.

So far this year, 216 IPOs have raised $43 billion, exceeding the total raised through the 221 IPOs from the previous three years combined, according to Renaissance Capital's IPOhome.com. By comparison, there were 486 IPOs in 1999 and 406 in 2000. The rise in activity is taking the IPO market back to more "normal" levels after several lean years, Smith said.

"This really has been kind of a subversive event. The whole year went by and it certainly hasn't been front-page, headline news, what's been happening with IPOs," Smith said. "Yet the market has been really strong. I guess Google kind of woke people up a bit."

Google Inc.'s effort to allow individuals access to its Aug. 19 IPO created huge publicity for the online search company, and raised public awareness about a process that is usually open only to institutional investors, or people of high net worth. It also heralded an upswing in IPO activity; the fourth quarter of this year has been the busiest since the third quarter of 2000.