Within the last few months, a slew of merger and acquisition (M&A) announcements have caught the headlines — Oracle’s acquisition of Sun Microsystems for $5.6B, Fidelity National Information Services’ acquisition of Metavante for $4.4B, EMC’s acquisition of Data Domain for $2.1B, Intuit’s purchase of Mint for $170M, and Adobe’s acquisition of Omniture for $1.8B. Although the markets are still 30% below their levels year over year, we have seen stock markets rise at a clipped pace particularly in the US, UK, Germany, and Japan. With smiles abounding, even Ben Bernacke has declared the end of the US recession.

With all this positive news, it’s easy to forget that housing prices are still mired down, unemployment is racing toward 10% and capital for many small to middle market firms remains frustratingly out of reach.

We’re not out of the woods yet.

With all this said, there is some light for start-ups. The M&A announcements of late signal a development which will likely strengthen in the coming months – the purchasing of innovation. Since M&A tends to be a trailing indicator of economic performance, the recent activity signals that there are willing buyers for firms that have continued to grow and innovate in spite of the tough financial climate.

During a down cycle, R&D tends to be adversely impacted. Over the last 18 months, many promising projects have been scrapped, personnel has been cut, and innovation has languished. With the uptick in M&A, the underlining trend will (in part) be driven by the chase for the new, new thing. The winners here will be the enterprises and start-ups that continued to invest in research and bring innovation to market during this dark economic chapter.

Since bull markets for stocks tend to foreshadow strong M&A markets, we may be on the cusp of something rather interesting. For the enterprises sitting on cash, it’s catch up time. Bargains can still be had amongst the myriad of start-ups. Although it’s clear we are not there yet, my spidey-sense says that late 2010-early 2011 will be an interesting time to be a well-capitalized and IP rich start-up.