CROSS-SECTORSECTOR COMMENT 24 JULY 2015ANALYST CONTACTSBenjamin S. Garber 212-553-4732 Asst Dir-Economist benjamin.garber@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market CommentM&A Frenzy Roils Ratings and Pumps Up Debt Issuance US merger and acquisition activity is on a record breaking pace this year and heavily influencing capital markets activity. Potential credit rating changes are dominated by links to M&A, with both positive and negative implications for credit quality. And debt origination volumes have been boosted by mergers to an unprecedented degree, lifting USD-denominated bond issuance to an all-time high. Steady corporate profit growth outside of the troubled oil sector would allow M&As outsized impact on financial markets to continue.Dealmaking builds on last years surge This long awaited boom in mergers arrived last year with force, and strengthened in the current year. Companies are seizing opportunities to add revenue and gain market share through acquisitions at a time when profit growth has slowed. US M&A volume jumped by 95% in 2014 to a record $2.8 trillion, according to Bloomberg figures. Adding to those gains, 2015 year-to-date volume of $1.7 trillion is running 25% ahead of 2014s pace and 9% ahead of 2007s previous record sum for the first six months of the year. Stocks boosted by the long-running bull market provide currency to undertake transactions, while highly accommodative investors provide additional funding through debt issues. Such debt issuance has frequently led to shifts in corporate credit ratings.Majority of rating reviews have an M&A link While M&A has always been a prominent cause of Moodys Investors Service placing a corporate borrower under review for a potential rating change; this year it is especially so (Figure 1). In the first half of this year, 73% of all US corporate and ...
