The bank said on Monday that M&A in Europe has been rising for three years and it sees no end in sight even as news of a proposed takeover of London-listed SAB Miller by Anheuser-Busch InBev raises questions about whether M&A is reaching a peak.
"We are always on the alert for signs of M&A excess because this proved to be a good signal of storm clouds ahead for equities in both 2008 and 2000," HSBC said in a report. "However, current M&A activity is nowhere near the extremes it reached in previous cycles."
SAB Miller, which makes Peroni and Grolsch beers, saw its shares rise more than 3 percent on Monday after newspaper reports at the weekend that it could receive a takeover bid of about $106 billion from rival AB InBev in coming days.
Mobile operator Vodafone meanwhile said on Monday it had ended talks with Liberty Global , Europe's biggest cable company, on an exchange of assets.
According to HSBC, European firms have the ability to ramp up M&A spending because they are in "surprisingly robust health" given the weakness of economic growth.
While economic growth has been tepid, low interest rates, subdued wage growth and falling corporate tax rates have all bolstered corporate profits – allowing firms to buy or build through capital spending.
"We believe they will increasingly choose to buy because the macro outlook is so uncertain," HSBC said.
It notes that M&A activity is not close to previous peaks and is balanced across a variety of global sectors, compared with 2007/2008 when M&A activity was concentrated in the financial sector or in 2000 when it was largely focused in the tech sector.
Some of this year's other notable M&A deals in Europe include Royal Dutch Shell's acquisition of oil and gas exploration firm BG Group in a £47 billion ($71.5 billion) deal in April.
According to research firm FactSet, M&A deal spending in the second quarter of this year rose almost 122 percent with an aggregate value of almost 431 billion euros ($481) compared to about 194 billion euros in the first quarter.
That jump in the value of deals reflects mega-deal trends in the second quarter, FactSet said.
HSBC added that U.S. companies may look to M&A as a way to maintain strong momentum in earnings.
"The divergence between buoyant U.S. earnings and depressed earnings in Europe is as wide as we have seen it in over 40 years, and has helped to drive a gap between equity valuations," HSBC said.
"Cross-border M&A might look particularly attractive given this valuation gap and the strength of the dollar," the note said.