M&A Surges Amid Growing Confidence

Transaction volume has grown 27% so far this year.

Mergers and acquisitions have surged this month with megadeals for iconic companies such as Dell Inc. and H.J. Heinz Co., fueling optimism that more buyers are ready to embrace $10 billion price tags.

Almost $40 billion in deals were announced yesterday, led by Heinz’s $23 billion takeover by Berkshire Hathaway Inc. and 3G Capital, data compiled by Bloomberg show. Transaction volume has increased by 27 percent so far this year compared with the same period a year earlier, signaling buyers are willing to spend again following last year’s mergers slump.

Debt Capacity

Easy access to cash may help solidify that. Borrowing costs with high-yield bonds, which investors typically use to fund leveraged merger deals, reached a record low in late January. Yields dropped to 6.41 percent on Jan. 25, compared with an average 9.27 percent over the past decade, according to the Bank of America Merrill Lynch U.S. High Yield index. High-risk, high- yield bonds, also known as junk, are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.

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