We've seen a lot of deal activity lately--Intel's $7.7 billion takeover of McAfee, BHP Billiton's nearly $40 billion hostile play for Potash, and of course the dueling by Hewlett-Packard and Dell for 3Par. We're well on our way to the best quarter for deals since the financial crisis set in, which is grounds for optimism. No less than McKinsey has proclaimed this is not "just another turn in the acquisition cycle" and that "the landscape for strategic acquirers hasn't looked this promising for decades." 

Wall Street banks are certainly thankful for the added fees. Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) appear to be the big winners in the boomlet so far. But it may be unwise for anyone to proclaim that mergers and acquisitions are about to really soar. 

Breakingviews notes that many deals announced recently have been by companies that "have taken it on the chin from shareholders. That reflects a mood in which cash, caution and skepticism dominate, making expectations of a merger and acquisition boom look overdone." The fees aren't paid until the deals close after all, and there's still plenty of time for things to go wrong. 

Still, one could be forgiven for feeling a bit optimistic about the state of the merger market. An analysis from Citigroup shows that in the two years after the recession of the early 1990s, global M&A volume rose by 25 percent and 24 percent, notes the Economist. In the first two years of recovery the 2000-01 recession, deals grew by 40 percent and 43 percent. 

There could well be some pent up demand for deals. Strategic deals are likely being thought through. Some industry leading firms have really bolstered their position against their peers, and the time may be ripe for action. Meanwhile, private equity firms have a lot of dry powder. All that cash has to be put to work. Blackstone's $4.7 billion purchase of Dynegy was the largest sponsor deal since 2007. And we've seen some tantalizing near misses. Recall the stunning, ultimately unsuccessful $15 billion effort by Blackstone Group, Thomas H. Lee Partners and TPG Capital to buy Fidelity National. Now that would've been something. 

Certainly, the financing environment looks good. A lot of companies are tapping the bond markets, but there are a host of good ways to put the proceeds to work other than acquisitions--cleaning up balance sheets, retiring debt, even buying back stock. And then there's the issue of the larger economy, and the fact that the debt markets could turn a bit rocky from here. All of that may be enough for a company to think twice about a deal, perhaps inducing the notion that the target can be bought cheaper a bit later. But hopefully not much later. - Jim