Global mergers and acquisitions activity this year is on course to surpass the record high set in 2007.
That has led some, like Centerview Partners cofounder Blair Effron, to sound the alarm over the level of activity, saying the market may be overheated. Others, such as Michael Carr, the global co-head of mergers and acquisitions at Goldman Sachs, have said that only thing that could stop the record breaking pace of activity is hubris.
In a note today upgrading the M&A advisory broker sector, Credit Suisse analyst Ashley Serrao set out two key reasons why the M&A cycle may have further to run: European deal makers and private equity funds.
"We believe expectations around the M&A cycle have become overly pessimistic and we reiterate our call for a flatter and longer M&A cycle than those seen in the past with the next leg driven by a pick-up in European and sponsor M&A as US growth slows," Serrao writes.
The note upgrades Moelis and Greenhill from underperform to neutral, and identifies Lazard and Evercore as the top two stocks in the M&A broker sector.
One of the slides in the report compares 2007 with 2015, comparing a range of factors including interest rates, chief executive confidence and default rates. The report states that more cash, confidence and funding indicates that the current cycle can continue.
The comparison highlights the low level of activity in Europe. With $1 trillion of deals announced there, activity is almost half what it was in 2007. Sponsor, or private equity, activity is also lagging, with private equity firms complaining they can't spend their cash.
Credit Suisse
Credit Suisse on M&A