Megamergers are back. Will it last?

• Mars, Verizon and now possibly Qualcomm have been on the lookout for big acquisition targets.
• Deals valued at more than $1 billion worldwide were up 22 percent from a year ago, LSEG data shows.
• Wall Street executives were upbeat about the burgeoning deal pipeline.

For Wall Street traders, the billion-dollar bankers are back.

In just the past few months, we’ve seen candy king Mars gobble up Kellanova, maker of Cheez-It and Pringles, for nearly $36 billion, including debt, and media giant Paramount Global, owner of CBS and Nickelodeon, earn in finalized a multi-billion dollar merger deal. Meanwhile, telecom giant Verizon Communications is buying Frontier Communications for $20 billion, including debt.

And even bigger mega-deals could be on the horizon: Qualcomm is reportedly eyeing rival Intel, which has a market value of nearly $104 billion.

So far this year, there have been 425 mergers worldwide valued at more than $1 billion, up 24 percent from the 2023 period, according to preliminary data compiled by LSEG. And there have been 25 “whales” — deals valued at more than $10 billion — so far this year, up 39 percent from the previous period.

Billion dollar bangers are emerging even if the overall outlook is not so encouraging. Closely contested US elections create uncertainty over regulatory and economic policies for corporate chiefs. The war in Ukraine and the conflict in the Middle East pose additional risks.

While the rise of mega-deals has helped boost the dollar value of global deals so far this year by 17% at $2.3 trillion, the number of announced mergers fell 21 percent from the previous year, according to LSEG data.

So what has revived what Wall Street refers to as “animal spirits,” at least when it comes to bigger targets?

Lower interest rates certainly help. Lower rates reduce the cost of borrowing.

Wall Street executives also pointed to pent-up demand among companies as the pandemic and its fallout, with higher inflation and supply chain disruptions, delayed merger growth plans.

David Solomon, chief executive of Goldman Sachs, the leading global M&A adviser, referred to a “backlog” of deals during the company’s second-quarter earnings call this summer.

“From what we’re seeing, we’re in the early innings of the capital markets and M&A recovery,” Solomon said. Merger activity, he noted, was still significantly below 10-year averages. “I think we still have 20% to go to the 10-year averages,” he said, according to an AlphaSense transcript.

Other Wall Street bank chiefs such as Morgan Stanley’s Ted Pick and Lazard’s Peter Orszag were upbeat about the M&A pipeline.

A recent KPMG survey of more than 1,300 CEOs of major companies around the world supports the idea that corporations are becoming more confident in doing business. Some 49% of US CEOs said in the survey that they are likely to make acquisitions in the next three years.

Shareholder activists are also spurring deals as companies look to streamline and refocus, Bloomberg reports. Its data shows at least $250 billion in spin-offs and asset sales this year.

“Markets and activists keep companies honest,” Hernan Cristerna, JPMorgan’s global president of mergers and acquisitions, told Bloomberg. “Executives want to anticipate demands by exiting non-core assets that may affect or distract from the performance of their core businesses.”