(MONEY Magazine) – Oracle wants rival PeopleSoft, which just bought J.D. Edwards. Liberty Media is purchasing home shopping network QVC. And golf king Callaway had ballmaker Top-Flite teed up, until German sports titan Adidas-Salomon swung in with a better offer. Merger mania? Maybe soon.

A surge of deals in June and July has observers optimistic that merger-and-acquisition activity, after plummeting over the past few years, is beginning to rebound. "In the past few summers, activity was truly dead," says Dennis Block, a top M&A lawyer at Cadwalader Wickersham & Taft. "But there's a pulse again."

Another good sign: There were 22 acquisitions with price tags of more than $1 billion announced in June and July, up from 14 in those two months a year ago. An increase in big mergers is often a leading indicator of a pickup in overall M&A volume. Merrill Lynch analyst Guy Moszkowski predicts that mergers will be up 20% next year.

That's good news for stocks. In the past 30 years the S&P 500-stock index has risen in 17 of the 19 years in which M&A activity has increased. Reason? Mergers boost stock prices. Acquirers usually pay a premium for targets, driving up the stock of the acquired company. On the business side, smart acquisitions can lead to higher profit margins as companies eliminate competitors and expunge excess capacity. Deals usually lead to more deals, as CEOs clamor to keep up with the competition. Finally, a jump in acquisitions signals optimism in the executive suite. "More mergers mean that managers are more confident about the future," says Byron Wien, senior investment strategist at Morgan Stanley. "That's favorable news for the market." --STEPHEN GANDEL