European companies have kicked off 2006 with more mergers and acquisitions than in any other first quarter on record, as cash rich companies race for growth in a round of frenzied takeover activity that is still gathering steam.
Mega deals such as Mittal Steel's £12.6 billion hostile bid for Arcelor and Gas Natural's $51 billion offer for rival Endesa have helped push M&A volumes to $393.8 billion in the quarter to March 24, surpassing the $345 billion in the first quarter of 2000, at the height of the Internet and telecoms boom, according to financial data provider Dealogic.
"It's pretty remarkable what is happening," said Jeremy Isaacs, chief executive officer, Europe & Asia for Lehman Brothers, which is advising Endesa in its defence against Gas Natural's bid.
"I think the trend does continue. This will continue to be a massive year from an M&A perspective," he said.
After racking up $1.1 trillion worth of deals in 2005, Europe's CEOs - now cash rich after years of restructuring - have stepped up the pace in the first quarter, spurred on by buoyant equity markets and the availability of low cost financing.
"It's driven by good equity and debt markets, CEO confidence and the notion that it's a global marketplace and you need to get yourself appropriately positioned," said Gordon Dyal, Global head of mergers and acquisitions at US investment bank Goldman Sachs, the world's top M&A adviser.
"Investors are also generally rewarding sensible strategic deals through the buyer's stock price, which is encouraging more M&A," he said.
As a result, CEOs are getting more daring. While they would prefer to do a deal on friendly terms, such is investors' appetite for growth that unsolicited and hostile bids have become the takeover method de jour, bankers said.
Last month E.ON AG launched a rival $57 billion unsolicited bid for Endesa, including debt, in what is Europe's biggest deal so far this year.
BASF is currently trying to pull off a $4.9 billion hostile acquisition of US rival Engelhard Corp, while Spanish construction group Grupo Ferrovial announced an unsolicited bid for British airport operator BAA Plc.
"Where someone makes a bid on an unsolicited basis... they think there is significant value in the target which is not reflected by the stock price, but the only way to get that (value) is for the target to change the way it operates," said Paul Gibbs, head of M&A research at US investment bank JP Morgan in London.
"Targets which are sitting out there not changing their ways are inviting approaches."
Activist shareholders are also playing a much greater role than ever before, and buyers are appealing to those shareholders to try and speed up the process.
That activist mentality is also spreading. Where hedge funds used to stand out from the crowd as the only shareholders willing to criticise management, now the traditional long-only investors also are entering the fray.
For example, institutional investor Fidelity, a shareholder in VNU, recently spoke out against the Dutch market research firm's agreement to be acquired by a group of private equity investors.
Sources close to the situation said last week Fidelity has given a tacit nod to a partial buyout of ITV, even though the British broadcaster's board has rejected the buyout firms' offer.
"It's really a result of widespread activism spreading into the traditional long shareholders who are putting more pressure on companies to deliver and who are more willing to see the bidders point of view," Mr Gibbs said.
One factor that could dampen the current M&A boom, however, is the wave of economic patriotism sweeping across continental Europe, where countries are trying to hang on to what they consider strategic assets.
The French government, for example, recently engineered a merger between utilities Suez and Gaz de France to ward off a potential hostile predator from Italy - Enel. Bankers say it is too early to predict the effect.
"I don't think anyone has a crystal ball in terms of how that's going to manifest itself. Will it be more of an issue, less of an issue? Who knows? It's clearly an issue now," said Goldman's Dyal said last week.
Most bankers seem to think the current boom will extend through 2006 and barring any unforeseen events into next year.
"There are no signs of it slowing down," said Mr Isaacs. "But it can't go on this way forever and you never know where the surprise will happen."