Companies are also able to do deals because financing is cheap.
Interest rates are still low. The yield on the 10-year U.S. Treasury note, which is a benchmark for many different types of loans from mortgages to corporate debt, stands at around 2.6 percent. Investors are also eager to buy corporate bonds, which makes financing a deal historically cheap for companies.
For example, Verizon Communications was able to sell $47 billion in bonds in September, the largest corporate bond sale in history.
Companies are also able to use their stock, much of it trading at all-time highs, as currency. After a weak start to the year, the stock market snapped back in February and ended Tuesday at a record high.
Facebook is mostly using stock to purchase WhatsApp. Comcast's proposed merger with TimeWarner Cable is an all-stock deal, and Actavis is using a combination of stock and cash to buy Forest Labs.
The high prices reflect the strength of corporate balance sheets and the confidence of CEOs. That encourages more deals.
"A healthy M&A market ultimately represents a flourishing economy," said Martyn Curragh, head of U.S. deals for PricewaterhouseCoopers. "Seeing a big deal come together successfully helps bring confidence to other companies who are possibly looking at doing a deal," he said.
"I don't think we've seen the floodgates open yet," Walsh said, "but looking six, 12 months down the road, we're definitely looking at a big increase."