Half of the companies in the Fortune 500 expect to be active in domestic mergers and acquisitions next year, a third are planning bond issues, while only 10% expect to issue stock, according to new research from Greenwich Associates.

“The bullish signs regarding M&A demand extend well beyond the Fortune 500,” says Greenwich Associates’ consultant Jay Bennett. “Forty-five percent of all large U.S. companies expect to use an external advisor on a domestic M&A transaction in the next 12 months, and nearly a quarter expect to hire an advisor for an international transaction.”

These findings are from Greenwich Associates’ 2005 Corporate Banking research study. The research reveals that 30% of large (and typically public) U.S. companies plan to do a domestic public bond offering in the next year, while only 10% plan to engage in a common stock transaction.

The report also finds that U.S. companies continue to see reductions in the numbers of sell-side analysts covering their companies. More than 20% of larger, publicly traded U.S. companies say the number of analysts covering them declined over the past 12 months. These reductions come on the heels of analyst cut-backs reported by more than 20% of companies in 2004 and almost 30% in 2003.

“The reductions have been most pronounced in the smallest companies included in our survey, which have annual sales of less than $2.5 billion,” says Jay Bennett. “Among these companies, more than a quarter experienced a reduction of coverage in the last year, as did about 25% of below investment-grade companies.”

At the same time, the portion of U.S. companies offering earnings and financial guidance actually increased, from 54% in 2004 to 60% in 2005. “Although many will see this result as a positive finding for market transparency, the research also suggests that a countervailing trend might be at work,” reports Greenwich Associates corporate product manager Marc Greene. “One in 10 U.S. companies says that it has plans to reduce or cease providing these communications in the coming year.”

Greenwich notes that companies are in a competition for the attention and resources of their banks. “Although it may seem counterintuitive that paying clients should be competing with one another for the resources of their service providers, it nevertheless is true,” the firm finds. “In the late 1990s and early 2000s, CEOs, CFOs and corporate treasurers actually took this competition as a given, and companies routinely rewarded banks that provided credit by selecting them to provide services and products that earned the banks a higher profit margin than lending.”

With access to capital a less pressing concern in today’s relatively easy credit environment, it would be simple to assume that the competition for bank resources has slackened. This is not the case. “Although companies might not be aware of it, they are actually competing against their peers for banking resources more than ever before,” says Greenwich Associates consultant John Colon. “In fact, the competition has spread from credit into cash management, treasury operations, equity and debt underwritings, M&A advice and every other service and product that companies want from their banks.”

Greenwich suggests that companies are competing for bankers because banks’ profit margins have been eroding in many areas of their corporate business. “Banks have made a decision that is entirely rational,” says Greenwich Associates consultant Jay Bennett. “Because they are making less money on certain products, they are cutting back on the resources they invest in these businesses. But they are not pulling out altogether, and they are not blindly slashing their commitments across the board. Instead, they are ranking companies in terms of their overall profitability across every one of the bank’s business lines. Those that rank at the top of this list will continue to receive high quality service in all products — including the ones that don’t earn much money for the banks. Those at the bottom of the list will suffer.”