Takeovers are off to good start

The rumors about a potential takeover of aluminum producer Alcoa Inc. this past week created an enthusiastic buzz on Wall Street that acquisitions this year will smash the $4 trillion record set in 2006.

Seven weeks into 2007, the amount of money for takeovers brokered by investment banks and private equity firms is trending above last year. In the U.S., market researcher Dealogic said volume has soared 86 percent to $228.6 billion from last year, while global volume rose 36 percent to $477.4 billion.

The statistics indicate that while the dollar amounts of these deals are growing, the number of them isn’t. There have been 519 deals in the U.S. so far this year, down 38 percent from 2006, while global transactions declined 25 percent to 2,392.

Analysts believe this shows a shift in M&A trends. Wall Street might see the number of deals edge lower. But, those still in the mix will fetch increasingly higher takeover bids, such as a potential Alcoa deal that would easily top $30 billion.

If anything, the wooing that goes on in these big deals shows the willingness to raise the stakes.

One thing is for certain, that U.S. companies are sitting on record cash stockpiles — at last count $605 billion racked up by members of the Standard & Poor’s 500 index — that can be used to expand through mergers and acquisitions.