If you bought or sold a company last year, you weren't alone. Both the volume of deals and their value rose sharply, according to Mergerstat, an M&A research firm based in Santa Monica, Calif. Through the first three quarters of 2004, Mergerstat reported the closing of 3,394 small or midmarket deals (those worth up to $500 million each). That's a 40% jump over 2003. Equity valuations surged ahead by 68%.

Low interest rates and a healthier economy have fueled the rise in activity. It didn't hurt that large numbers of both buyers and sellers have crowded the field. "When we bring a deal to market, the number of buyers looking for information has gone up dramatically," says Hector Cuellar, president of RSM EquiCo, an investment bank in Costa Mesa, Calif., that specializes in middle-market deals.

The latest figures mark a return to the level of activity seen prior to the dot-com meltdown. After the bubble burst, private equity and hedge fund investors shied away from M&A. More recently, their appetite returned thanks to the relatively weak market for initial public offerings. The M&A market tends to have an inverse relationship to the IPO market, explains James Parrino, a finance professor at Babson College in Wellesley, Mass. Now that the number of public offerings is rising, however, Parrino thinks private equity and hedge funds are poised to get back into IPOs, which may dampen excitement about M&A in the year to come. Of course, the vitality of both the IPO and M&A markets depends on whether the economy continues to grow. For the time being, though, people who are interested in selling a company will find a lot of ardent suitors.