US Companies Set to Boost Debt Levels Amid $1 Trillion Acquisition Wave

US companies are set to boost their debt levels to fund a $1 trillion wave of acquisitions, reversing a trend of scaling back borrowings. The Federal Reserve's potential rate cuts, improved regulatory approval for tie-ups, and reduced stock market volatility have improved conditions for M&A. Companies have been lifting their debt loads relative to earnings, with the leverage ratio close to its highest level since 2021.

US companies are set to increase their debt levels to fund a $1 trillion wave of acquisitions, reversing a trend of scaling back borrowings. This shift is driven by several factors, including the potential for the Federal Reserve to cut interest rates, improved regulatory approval for corporate tie-ups, and reduced stock market volatility [1].

Companies have been lifting their debt loads relative to earnings, with the leverage ratio close to its highest level since 2021. For instance, Keurig Dr Pepper Inc. recently announced the acquisition of JDE Peet’s NV, funding the deal with a €16.2 billion ($19.0 billion) bridge loan [1]. Similarly, AT&T Inc. is acquiring spectrum licenses from EchoStar Corp. for about $23 billion, likely to be partly funded with bonds [1].

The Federal Reserve's potential rate cuts are seen as a key factor in this shift. As the Fed moves closer to a renewed round of rate cutting, borrowing costs may fall, making acquisitions more affordable. Additionally, the Trump administration is seen as more likely to grant regulatory approval for corporate acquisitions, further boosting confidence among executives [1].

The improved conditions for M&A have led to a surge in debt-fueled acquisitions. Syndicate professionals expect many recently announced deals to make their way to the debt markets later this year or in 2026 [1]. This includes Keurig Dr Pepper’s tie-up, expected to close in the first half of next year, and AT&T’s transaction, expected to finalize in mid-2026 [1].

However, some firms may choose to sell debt before completing their deals, especially if credit spreads stay tight and borrowing costs fall further. This could include a condition known as special mandatory redemption language, allowing companies to buy the bonds back at a small premium if their acquisition doesn’t go through [1].

In conclusion, US companies are poised to boost their debt levels to fund a significant wave of acquisitions, driven by improved conditions for M&A. This shift is likely to continue into 2026 and beyond, with more debt-fueled deals expected in the high-grade company sector [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-08-30/corporate-leverage-poised-to-rise-on-deals-deluge-credit-weekly