M&A rise also good for little guy

NEW YORK – The stock market’s big 2006 advance gave a boost to more than investment portfolios – it fueled a frenzied pace of mergers and acqusitions, with hedge funds and private equity shops sending the total value of acquisitions to a staggering $4 trillion.

This set a record for M&A, besting the dot-com boom in 2000, when the value of deals totaled $3.3 trillion, according to M&A tracking firm Dealogic. It gave Wall Street bankers a lot to smile about, especially given the astronomical bonuses doled out this year.

But, the little guy wasn’t exactly left out either. All the robust acquisition activity gave investors confidence in corporate profits, and has helped send the Dow Jones industrial average to a record 12,000 and beyond.

There were 31,825 deals this past year, according to Dealogic. Private equity firms contributed to 18.4 percent of the deals in 2006.

Participation by these buyout shops has injected the market with a massive amount of liquidity, analysts said. And companies, many fed up with scrutiny from investors and regulators, have been willing to become private companies.

The intense acquisition activity is driven by the surplus of cash held by private equity firms and public companies. With members of the Standard & Poor’s 500 having about $608 billion in cash, the whiplash pace of M&A will likely go on.