LONDON – Merger and acquisition activity worldwide surged on Monday with a focus on real estate, mining, media and stock exchange sectors as demand by private equity funds and the push for industry consolidation gathered pace.

In the U.S., private equity fund Blackstone has unveiled a real estate deal worth up to $36 billion, while mining group Freeport-McMoRan Copper & Gold agreed to buy copper miner Phelps Dodge Corp for $25.9 billion.

But big deals were also announced from Australia to London and the total announced globally since early Friday in Europe to 1200 GMT on Monday is around $88.5 billion, according to financial research firm Dealogic.

The surge is being driven by profitable companies which have large amounts of cash for investment, and by the flood of money into private equity funds that also needs to be put to work.

“If you quantify the boom so far, we haven't seen anything yet,” said Teun Draaisma, head of European equity strategy at Morgan Stanley.

Draaisma calculates that European M&A this year is on track to hit $1.2 trillion, matching the record in 2000, but relative to the size of the overall market, the volume of new deals is still below previous peaks.

At the time of the last peak in M&A activity there were a lot of hostile deals and many bidders were offering their own stock instead of cash to finance the deal, he said.

“We haven't seen any of that yet, its been mostly smaller companies, quite friendly deals and mostly in cash.”

Nothing we look at suggest we're seeing a peak in the M&A cycle,” Draaisma said.

Dealogic announced last week the value of global mergers and acquisitions for 2006 had reached a record $3.368 trillion, beating the previous high set in 2000 of $3.332 trillion.

Private equity firms accounted for 22 percent of total global M&A volume in the first nine months of the year, hitting a new record of $570.1 billion in deals.

INVESTORS FEARS MUTED

Few investors can see an immediate end to the trend, at least until one of the recent deals turns sour.

“There's an enormous wall of money that has been raised..and that money needs to be invested. Maybe the music will stop when we get a significant (deal) failure,” said Ted Scott, director at F&C Asset Management's retail funds arm.

“Increasingly they (deals) are becoming more risky and marginal gains are being made. Some of the valuations are quite toppy, to say the least,” he added.

But amid a benign global macroeconomic environment and low interest rates, which have created a wide spread between the cost of debt and the return on equity, deals to consolidate industries and capture cash flows are expected to dominate.

In the mining sector the global consolidation story has been running all year as companies scramble to add reserves and capitalise on record high metal prices. Those that don't succeed could become targets themselves.

“The mining sector stocks have all got so much cash on their balance sheets there is a risk they are getting vulnerable,” said Chris Tinker, equity strategist at inter-dealer broker ICAP.

The Blackstone bid for U.S. office building owner Equity Office Properties sets a benchmark for a takeover by a single private equity fund. The deals values the company at $19 billion, excluding debt, just shy of the $21 billion paid earlier this year for hospital operator HCA Inc but that deal involved three buyout firms.

Among other U.S. deals unveiled on Monday, the U.S. stock exchange Nasdaq launched a $5.1 billion deal for the London Stock Exchange and Bank of America agreed to buy U.S. Trust Corp, the private banking unit of Charles Schwab Corp for $3.3 billion.

In the media world, private equity giant Kohlberg Kravis Roberts unveiled a $3.1 billion deal in Australia to set up a joint venture with Seven Network Ltd to enter the TV magazine and online media businesses.

(Additional reporting by Tom Burroughes)