Low interest rates heat up the M&A bond market, with quarterly financing reaching a four-year high.

Notice, companies are rushing into the bond market seeking cheap financing for mergers and acquisitions, taking advantage of favorable conditions even before transactions are completed. Data shows that this has led to a global mergers and acquisitions financing volume of $113 billion this quarter, making it the largest in four years and one of the highest on record. Just last week, Merck and GE Healthcare collectively raised $9.25 billion for acquisitions announced just two weeks earlier. These issuances indicate how strong credit sentiment is as we approach the end of 2025, with corporate spreads close to historic lows and funds continuing to pour in. With the recovery of merger activities and concerns about the potentially market-shaking massive debt financing for AI next year, companies in Europe and the Americas are racing to execute their financing plans. A spokesperson for Magnum Ice Cream Company said, "The credit markets currently provide extremely favorable bond issuance conditions. Therefore, the company has decided to take advantage of this." The company raised 3 billion before its spinoff from Unilever. This is the busiest quarter for merger financing since 2021 Following its proposed acquisition of biotechnology company Cidara Therapeutics Inc., Merck issued eight tranches of bonds, but the transaction is not expected to be completed until the first quarter of 2026. Similarly, GE Healthcare's acquisition of medical imaging software company Intelerad Medical Systems Inc. is scheduled to be completed in the first half of 2026. The pharmaceutical industry has been very active, with Novo Nordisk raising 4 billion in Europe last month for the acquisition of Akero Therapeutics Inc., followed by Pfizer selling $6 billion in dollar bonds for the acquisition of Metsera Inc. Overall, this year has been a record year for global bond sales. James Coniff, Head of European Corporate and Structured Debt Capital Markets Syndicate at HSBC Holdings, said that while low borrowing costs attracted these issuers, bond supply and investor inflows were very well matched. "The Euro market has effectively absorbed a large amount of merger/capital expenditure financing," he said. Demand has been so strong that borrowers do not have to pay a premium even when including provisions (specifying debt repurchase if the merger is not completed by a set date). This to some extent alleviates the risk of companies being burdened with additional debt if the deal fails, although in such a scenario, issuers may still face some penalties. Christian Schnepel, Head of Investment Grade Corporate Syndicate at Credit Suisse, said, "By the textbook, you should pay up for a deal with special merger redemption provisions, and if you try to price too tight, you'll get pushback from investors. But when the demand levels for these transactions are as high as they are currently, all of this goes out the window." Magnum included a provision in its bonds allowing for early repayment if its spinoff is not finalized by mid-next year. Typically, in such cases, the new company relies on bank credit lines as financing basis. In November, telecom company Orange SA was eager to enter the market and confident in its acquisition of the remaining stake in joint venture MasOrange, to the point that its bonds even did not include special acquisition provisions. If the acquisition fails, this debt can simply be used as early refinancing to refinance Orange's maturing debt. Return of Merger Activity Although the return of merger activity has been touted in the market for years, deals are resurging strongly in the second half of 2025. Now, bankers are anticipating a broader recovery in 2026. According to calculations, banks have underwritten around $65 billion in leveraged buyout-related debt for 2026. The latest mega-deal is Netflix's $72 billion acquisition of Warner Bros. Discovery, for which Netflix has secured $59 billion in financing commitments from banks. Netflix's bridge loan is expected to be replaced by up to $25 billion in bonds, as well as other credit facilities. Mark Lineage, Deputy Head of Global Capital Markets at BNP Paribas, said, "The preparation time for the M&A process is obviously quite long, and many deals have been postponed from this year. The market is more stable recently, so looking ahead to the first half of next year, we are optimistic about more deals being completed."