I meant to write something last week about the market for corporate control and the recent spate of high-profile deals. I never quite got around to it. Thankfully, Michael de la Merced did (see Signs of an Upswing in Merger Activity).

What I especially appreciate about Michael's piece (see also Private Equity: Out of the Ashes) is that it faithfully reports the recent uptick in corporate transactional activity, while being careful not to exaggerate the trend or extrapolate from the coincidental timing of a small number of high-profile deals. Michael is careful to point out that we are a long way from a "healthy" market for corporate control, and I could not agree more!

As Mr. de la Merced points out:

Merger mania may not be quite in full swing. But the pace of deal-making is showing signs of rousing back to life after nearly a year.

Kraft Foods' hostile bid for Cadbury on Monday was only the latest potential blockbuster deal in recent days. In the last week, several multibillion-dollar deals have been announced, including those involving prominent companies like Walt Disney and eBay.

Yet many of the bankers and lawyers who piece these mergers together, well versed in reading economic tea leaves for signs of an industry's health, caution that deal-making is likely to rise only in fits and starts for now.

"The clouds have broken a little bit, and there's a little bit of sunshine," said Douglas L. Braunstein, the head of investment banking for JPMorgan Chase. "But it's too early to say the storm's over."

Deal activity remains far below the giddy heights of only a few years ago. About $1.32 trillion worth of deals have been announced this year through Monday, according to data from Thomson Reuters. That figure is down 37 percent from the same point last year and 56 percent from 2007. (It also includes deals that have yet to close.)

In fact, until last week, August shaped up to be the slowest month for deals since 1994, according to Thomson Reuters. Now, it is just the slowest month since last November.

Another trend that Michael has picked up on, and one that I have discussed in previous posts, is the acquisition of troubled/distressed/bankrupt targets:

…the troubled deals of yesterday have led to opportunities for companies and private equity firms, which are snatching up targets out of Chapter 11. The number of bankruptcy-related mergers and acquisitions has risen to 241 this year through August, a 65 percent increase over the same time in 2008, according to Thomson Reuters data.

…What lies in store is mostly expected to be more of what has transpired this year: opportunistic purchases by corporations with healthy credit ratings, stock values and cash.

That is where I expect the lion's share deal-making activity to take place over the next few years years (see Private Equity: Out of the Ashes). There will be a hearty market for distressed assets, in which companies with strong balance sheets acquire those with weak balance sheets. This will likely usher in a wave of industry consolidation.