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Mergers Watch: The Billion-Dollar Deals Just Keep Coming


Another Monday, another $60 billion in merger deals.

Fueled by private equity money and low interest rates, mergers and acquisitions are reaching a fevered pace at year-end.

"There's a lot of money looking for a home, and valuations are not obscene," John Forelli, senior vice president at Independence Investment in Boston, told Reuters. "Stocks are still fairly valued and that gives strategic buyers plenty of reason to pay a premium."

In one of the biggest deals of the day, private groups Apollo Management and Texas Pacific reached a tentative agreement to acquire Harrah's Entertainment for $90 a share, or $16.7 billion, CNBC's David Faber reported.

Apollo Management has also agreed to buyRealogy Corporation, the owner of Coldwell Banker, for $6.6 billion.

Biggest Potential Deal

The biggest potential deal was led by pharmacy benefits manager Express Scripts , which offered$26 billion for rival Caremark, topping CVS's $21 billion deal in November to acquire Caremark. If the deal goes through for $26 billion, it will rank #9 on the list of the year's top ten mergers.

Also, Biomet has agreed to be acquired by a private equity consortium for approximately $10.9 billion, or $44 a share in cash. Biomet makes musculoskeletal medical products. 

Finally, auto parts supplier Delphi Corporation has accepted a $3.4 billion investment from a group of private equity companies as part of a plan to emerge from Chapter 11 next year. 

The proposed transactions of Sunday and Monday will take the value of global mergers for 2006 to an all-time high of over $3.8 trillion, according to Dealogic. The previous high was $3.332 trillion in 2000.

One expert said the merger boom should continue.

Activity to Continue

"I don't see any reason why it should calm down," said Brian Sterling, co-head of investment banking at Sandler O'Neill & Partners. "The same drivers of transactions -- the state of the economy, the state of the industries, and all the macro and micro trends related to them -- don't look like they are going to change through year-end. We expect volume of activity to continue."

High-yield bond investors have also helped boost M&A activity by snapping up new debt issues at a record pace this year, allowing private equity firms to finance some of the largest buyouts in history.

Research firm Dealogic said earlier this month the volume of mergers and acquisitions by private equity firms and other financial sponsors so far this year hit a record at over $626 billion, up about 90 percent from a year earlier.

Further, private equity firms have raised about $300 billion in new funding worldwide this year, according to research by Private Equity Intelligence.

Some analysts warn that too much private equity activity could be a warning sign.

"I do think it is a risk," said Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, appearing on "Squawk Box." "You need to watch for the froth and you need to watch for some of the deals to start to look a little less savory as a signal that maybe we're closer to the end."