This article originally appeared on Business Insider.
Corporate deals are making an epic comeback this year.
This week alone, Capital One agreed to acquire Discover for $35 billion, Truist Financial announced a $15.5 billion sale of its insurance business, and Walmart joined hands to buy TV maker Vizio for $2.3 billions of dollars.
The three transactions, worth a combined $53 billion, brought the value of deals announced worldwide this year to $425 billion, a 55% increase from the same period in 2023, Bloomberg estimates.
This is a stark contrast from the last two years. According to the London Stock Exchange Group, the value of global trades plummeted from more than $5 trillion in 2021 to less than $3 trillion in 2023, and volumes fell 17% to 55,000 trades.
Megadeals have been particularly hard hit. Deals worth more than $5 billion plummeted 60%, from almost 150 deals in 2021 to fewer than 60 last year, LSE Group found.
Mergers and acquisitions, initial public offerings (IPOs) and other types of deals collapsed in 2022 and 2023 as interest rate hikes implemented by central banks to fight inflation made financing more expensive.
A muted first half for stocks, recession fears, increased regulatory scrutiny, fears of a US debt default and the outbreak of a second war have also fueled uncertainty and flattened valuations.
High ratings
This year’s abundance of deals reflects a sunnier market and economic outlook. Stocks are trading at near-record highs, giving companies a powerful currency to make deals.
High valuations also encourage selling, and many buyers prefer to bet on assets that are rising in price in the hope of future gains.
Meanwhile, the Federal Reserve and other central banks have signaled that rates have likely peaked and are likely to fall this year, lowering borrowing costs and reducing the risk of recession.
Many companies are in good shape with strong cash flows and balance sheets, which means they can afford to make acquisitions. There’s also latent demand for deals after a couple of lean years, particularly among companies that are eager to go public or are strapped for cash, looking to expand or looking to cut costs.
Additionally, private equity firms are under pressure to capture the increased value of their assets and return a return to their backers.
However, the sky is far from clear for aspiring dealmakers. Potential headwinds include persistent inflation, a surprise recession, escalating armed conflicts, regulatory crackdown and uncertainty over this year’s presidential election.