Glencore International Plc's $41 billion purchase of XstrataPlc, the biggest takeover in almost three years, may help restoreconfidence in dealmaking amid evidence global economic turmoil issubsiding.

Glencore's proposed takeover, the biggest mining transactionever, is the latest sign executives are becoming bolder aftermergers and acquisitions in January slumped to the lowest levelsince August 2009, the slowest start to a year in almost a decade,according to data compiled by Bloomberg.

While takeovers are down 29 percent from a year ago, encouragingeconomic data from the U.S. and progress in European debt talks mayunleash pent-up demand for acquisitions, bankers say. Europeanbuyers have accounted for 43 percent of this year's M&A volume,and keeping that pace would snap a four-year decline in Europe'sshare of global transactions, Bloomberg data show.

“Corporates are as hungry for growth initiatives as ever,”including transformational deals and divestitures of slow-growingdivisions, said Christopher Ventresca, co-head of M&A for NorthAmerica at JPMorgan Chase & Co. in New York. “As people feelmore stability and less systemic risk, they will be morecomfortable announcing both of those types of deals.”

The Glencore-Xstrata deal followed ABB Ltd.'s agreement on Jan.30 to buy Thomas & Betts Corp. for $3.9 billion to expand itsNorth American distribution network and boost sales of low-voltagepower equipment. Roche Holding AG is offering $5.7 billion in ahostile bid for Illumina Inc., a provider of gene-mapping equipmentand services. Eastman Chemical Co. announced a $3.38 billionacquisition of Solutia Inc. on Jan. 27.

The purchases have coincided with more positive news on theeconomy. The U.S. jobless rate unexpectedly dropped last month tothe lowest level in three years, and the Commerce Departmentdisclosed on Jan. 27 that gross domestic product climbed 2.8percent in the fourth quarter, the fastest pace since 2010. InEurope, Greece's government and international creditors are workingon the final draft of an agreement that would help free up a secondaid package. The MSCI World Index had rebounded 19 percent throughyesterday from an Oct. 4 low.

Metals, mining and coal were some of the busiest sectors fortakeovers last year, comprising about 8 percent of transactions, orabout twice their historic share, according to data compiled byBloomberg. Deals in those industries amounted to $179.5 billion,the most since 2007.

BHP Billiton Ltd., facing a new threat from a combined Xstrataand Glencore, today said it has the capacity to continue makingacquisitions. BHP may target the copper, potash and energy sectors,Chief Executive Officer Marius Kloppers said in August.

Oil and gas and information technology also led M&A lastyear, making up for fewer takeovers in telecommunications andfinancial services.

Not Only Mining

“The consolidation will probably continue, not only in themining space,” said Matthias Fankhauser, a fund manager at ClaridenLeu in Zurich, which oversees about $100 billion in assets. TheGlencore deal “will encourage other companies to think the same.They now realize that size matters, as all companies are trying toget volume and protect their margin. It's easier to do so when youare big.”

More large deals may be coming. Nestle SA and Danone SA madefirst-round bids for Pfizer Inc.'s baby-formula business, peoplewith knowledge of the process said in January. That division of theNew York-based drugmaker may fetch as much as $10.5 billion, peoplefamiliar with the situation said last year.

AMR Corp.'s American Airlines, a takeover target now that it'sin bankruptcy, has attracted interest from Delta Air Lines Inc. andUS Airways Group Inc. this year, people with knowledge of thematter said last month.

Yahoo! Inc., the largest U.S. Web portal, is examining a sale ofits Asian assets, which include stakes in Alibaba Group HoldingLtd. and Yahoo Japan Corp., people familiar with the matter saidthis year. The company, whose market value is approaching $20billion, was also in talks with buyout firms about selling aminority stake in itself, the people said.

Technology takeovers may again boost M&Athis year as companies such as Cisco Systems Inc. hunt foracquisitions that will increase their capacity to provide newstorage, analytics and security services to enterprise customers.Hewlett-Packard Co., Google Inc. and Microsoft Corp. led a 38percent gain in technology deals last year, outpacing an advance ofabout 3.7 percent for all of M&A worldwide, Bloomberg datashow.

“M&A activity is certainly on an upward trend from adesperately low level late last year,” said Will Jackson-Moore,U.K. transactions leader at PricewaterhouseCoopers in London.“Still, corporations are showing a lot of restraint and they willremain very selective about opportunities. They want to protecttheir balance sheets, which is one of the reasons balance sheetsare as strong as they've ever been.”

The biggest 1,000 companies globally are sitting on almost $3.5trillion of cash and equivalents, up 12 percent from a yearearlier, according to data that excludes financial-servicesfirms.

Blocked Takeovers

Regulatory hurdles may still be a concern for executives lookingat transformational deals after AT&T Inc. was forced to abandonefforts to buy wireless operators T-Mobile USA for $39 billion inDecember. Deutsche Boerse AG and NYSE Euronext terminated a mergeragreement that would have created a $26 billion transatlanticexchange group on Feb. 2, a day after European antitrust regulatorsrejected the combination.

The U.S. Federal Trade Commission, meanwhile, is reviewingExpress Scripts Inc.'s $29.1 billion offer for Medco HealthSolutions Inc., which would create the largest U.S. manager ofpharmacy benefits for employers, insurers and union healthplans.

To gain more confidence, companies may still need to see a bigdeal in an industry that has been sluggish, said Scott Moeller, aprofessor in the practice of finance at Cass Business School inLondon, who is a former M&A banker at Deutsche Bank AG andMorgan Stanley.

“There is going to be a trigger event that kicks off the market,where people say, now it's time and if people begin to think now isthe time to act, we could see a resurgence,” Moeller said.

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