Credit crunch? What credit crunch? For the first time in months, investment bankers had smiles back on their faces yesterday. The sniff of the megadeal was back in the air and, for a day at least, they could forget the misery of the credit crunch and bask in the limelight once more.

It was almost like a return to dot-com bubble days. As downbeat City workers drifted into work, the news that China had made its biggest foreign acquisition began to seep out. In a series of stealthy overnight deals, Beijing had moved through the market and snapped up a sizeable stake in Rio Tinto, seeking to bust up BHP Billiton’s attempt to acquire the London miner.

In just over six hours, Chinalco had spent $13 billion to guarantee itself a seat at the table. Lehman Brothers, the investment bank that carried out the dawn raid, was in serious bragging mode. But its glory was shortlived.

In a dot-com moment, no sooner had Chinalco announced its deal than the second bomb dropped: Microsoft had made an unsolicited bid to acquire Yahoo!, the American search engine. Share prices soared and markets around the world jumped in relief. Wide-eyed bankers hit the phones.

What yesterday’s two deals underscore is that cash in these markets is king. The mergers and acquisitions merry-go-round has taken a severe battering since last summer as banks have reined in their lending in the face of the worst credit crisis in decades.

Private equity has been by far the hardest hit and the days of the multibillion-dollar buyout are now long behind us. But for the most part corporates are in pretty good shape.

So far they’ve been quiet. They have sat back and watched the equity markets fall in line with the worsening economic backdrop and, with plenty of cash in their wallets, many are deciding the time is ripe to pounce.

For sure, Microsoft does not know if we have yet reached the bottom, but for now, valuations have fallen far enough to make a $44.6 billion tilt at Yahoo! appear good business sense. A recent string of interest rate cuts by the US Federal Reserve is also helping to keep the party going.

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