As of mid-May, total M&A activity world-wide totaled about $2.19 trillion, compared with the record $3.87 trillion for all of 2006, according to Dealogic. In the U.S. M&A activity totaled $717.37 billion through May 16, on pace with last year’s $1.49 trillion. Both are shy of 1999 and 2000, when activity topped $1.5 trillion in each year.
Private-equity buyouts have totaled $218.7 billion so far this year, compared with $421.56 billion last year and $53.9 billion in 2000.
So far this year, buyouts represent 30% of the the total value of all U.S. deals, slightly ahead of last year's pace, and about 14% of all mergers.
So this year's pace is on track to tie a record year in buyouts -- which occurred at the end of a stock market bubble.
“It will end,” Steve Rattner, managing principal of Quadrangle Group, told CNBC’s “Power Lunch” recently. “We are in a credit bubble. Credit is an over-valued commodity at the moment. The lenders are not getting compensated relative to the risks they are taking and at some point that will change. Right now, the default rates are at historic lows and that will also change. When it all changes, we’ll get back to some kind of norm."
Right now credit is cheap. Below are charts of AAA and Baa credit from the St. Louis Federal Reserve. Notice that interest rates are still low by historical standards.