Executive Summary/Highlights: 

• Global M&A volume in Q2 was US$603 billion (US$2.2 trillion on an annualized basis), reflecting a relative rebound after a very slow first quarter (up 18% compared to Q1).
• The M&A environment is showing signs of improvement as strategic and private equity acquirers look to deploy their cash and take advantage of stronger balance sheets.  The record low cost of debt financing for investment grade borrowers has also facilitated deal activity.  Nonetheless, M&A activity continues to be restrained by the continued crisis in Europe, stock market volatility and slower-than-expected growth in the United States, a slowdown in key Asian markets, and regulatory pressures.
• Deal activity increased in most geographic sectors in Q2, with quarter-over-quarter M&A growth in each of the United States, Europe, and Asia for the first time since early 2010.  Europe and the United States contributed 63% of global M&A volume in Q2, although the respective shares of global M&A compared to global GDP of Japan, China, and much of the developing world indicate room for continued M&A growth in those jurisdictions.  M&A activity in China and Central Asia in particular are trending above recent historical averages.
• Cross-border transactions accounted for 42% of global M&A volume in Q2, with cross-border deal volume remaining consistent with 2010 and 2011 levels on an annualized basis, despite a decline in aggregate deal volume so far in 2012.  Cross-border deal activity increased in most sectors in Q2 compared to Q1. 
• “Mega deals” (or at least smaller mega deals) showed a modest rebound, with six deals exceeding US$10 billion in value in Q2 (compared to just one deal in Q1); many of the largest deals in Q2 were cross-border transactions.
• The resource sectors continued to drive global M&A volume, with Energy & Power and Materials producing the greatest overall volume over the past 12 months, although Q2 witnessed a surge in Consumer Staples and Retail driven by large cross-border transactions.  Deal volume in the Financial and Healthcare sectors also increased after three consecutive quarterly declines.

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