Why M&A Funds Are Hot

January 21, 2010 at 10:00 PM UTC

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Anyone seeking green shoots in this economy should look at global M&A, where you can actually spot a few saplings. The value of deals in November hit $323 billion, the highest monthly tally since July 2008. Five deals valued at more than $10 billion, including Novartis' (NVS) bid for Alcon (ACL) this month, have been announced since December.

Dealmaking will be driven by cash-rich companies looking for bottom-line growth, rather than private equity firms, which still face a challenging financing environment, says Bob Filek, partner with PricewaterhouseCoopers Transaction Services in Chicago. These corporate hookups are the bread and butter of merger arbitrage mutual funds, which have seen total assets nearly double in size over the past year. "The driver of this wave of mergers is global growth, and it's happening now," says Mario Gabelli, CEO of GAMCO Investors in Rye, N.Y.