Record levels of capital markets activity during the first six months of the year failed to lift the volume of worldwide mergers and acquisitions as chief executives remained cautious about launching big deals.

Non-financial groups raised almost $887bn in the bond markets in the first half, 64 per cent more than the same period last year when $540.3bn was raised, according to data from Dealogic.

However, this did not translate into higher levels of M&A activity, which totalled just $1,100bn, the lowest semi-annual volume since the first half of 2004. This was in spite of a flurry of activity across sectors including Xstrata’s $48.3bn hostile approach for rival mining group Anglo American.

Dieter Turowski, head of European M&A at Morgan Stanley, said past cycles suggested there would be 18 to 24 months of reduced volumes ahead. “We have reached the bottom, but recovery will be slow and fragile,” he said. “One encouraging sign is that we have incredibly open bond and equity markets. That means investment-grade companies can finance their deals and even resurrect some of those which were put on hold because of the turmoil in capital markets.”

Global equity capital markets issuance was dominated by offerings from the finance sector in the second quarter as banks rushed to raise money to repay funds from the US troubled asset relief programme. Banks and financial institutions raised $89bn via 92 deals – the highest quarterly count on record.

However, this was not enough to boost the overall volume of equity capital market offerings, which totalled $330bn via 1,738 deals in the first half, the lowest since 2005 and the lowest deal count since 2003.

“Capital markets activity remains strong. M&A is coming back slowly and we expect to see more bear hugs and share offers,” said Sebastian Grigg, head of UK investment banking at Credit Suisse.

Goldman Sachs ranked as the top M&A adviser globally, in Europe and in Asia, while Morgan Stanley took pole position in the US.

Advisers generated just $4.9bn in fees in the first six months of the year – less than half the $11.4bn in the period last year.

Boutique M&A firms increased their revenue wallet share to 15 per cent, from 13 per cent for the first half of 2008.

Private equity buy-outs still remain depressed and totalled just $22.9bn, the lowest half-year volume since 1997.

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