By Dana Mattioli And Dana Cimilluca 

Deal making among health-care companies continues to improve the well-being of the mergers-and-acquisitions SHYmarket.

Driven by takeovers like AbbVie Inc.'s March agreement to buy cancer-drug maker Pharmacyclics Inc. for $21 billion, merger activity among health-care companies rose 108% year over year in the first quarter, to $126.4 billion, according to Dealogic. That is the second-highest total for the period on record after 2009, when $136 billion of the deals were struck. Health care was the busiest sector for M&A globally in the quarter. In the U.S., the sector generated more than a quarter of all M&A activity.

The boom is providing a major lift to an M&A market that, after years in the doldrums, has come roaring back to life. Overall, deal volume in the first quarter rose 24% to $874.1 billion globally. In the U.S., it jumped 30% to $405.7 billion. A final lift in the quarter came from the announcement March 25 of a non-health-care deal: the roughly $50 billion purchase of Kraft Foods Group Inc. by 3G Capital Partners LP and Warren Buffett's Berkshire Hathaway Inc.

Bankers and lawyers who help arrange corporate marriages are optimistic that 2015 broadly will be another strong year like 2014, even if volumes don't reach the heights of 2007, the best year ever for M&A.

A confluence of factors is responsible for the surge in health-care deal making, bankers say. They include President Barack Obama's Affordable Care Act, which has sent companies scrambling for tie-ups that will enable them to better cope with changes the law has triggered, and the need of many drug companies to replenish product pipelines. Also feeding activity are factors that are providing ballast for the M&A market broadly, including low interest rates and a strong stock market, which gives executives confidence and makes shares offered in transactions more valuable.

"Inexpensive credit, the importance of scale and the inflection point caused by the Affordable Care Act are causing companies to feel like this is the time to strike with a bold step," said Clifford Stromberg, a partner at law firm Hogan Lovells's health-care-transactions practice.

So far this year, three of the top seven deals announced globally involved health-care companies, according to Dealogic. Real estate was the second-most-active sector, with $106 billion in announced transactions, followed by technology with $82.3 billion. Oil and gas, traditionally a major contributor to M&A activity, registered just $19.1 billion of deals, as the plunge in crude prices took its toll.

Another factor helping fuel the health-care deal-making boom is investors, who have in many cases bid up the shares not just of companies being bought, but of their acquirers, too.

"The market is reacting well to health-care transactions, even where there is a large premium," said Steven Baronoff, Bank of America Merrill Lynch's chairman of global M&A.

The significant bidding interest that health-care auctions are drawing is emboldening more companies to put themselves up for sale, Mr. Baronoff added.

Salix Pharmaceuticals Ltd. recently ran an auction that turned into a spirited bidding contest. Valeant Pharmaceuticals International Inc. outbid rivals in the monthslong process, agreeing to buy Salix for about $10 billion--and the Canadian drug company's stock shot up 15% on Feb. 23 on the news. Then, Endo International PLC in March submitted a higher bid, seeking to break up the deal even though buying Salix would mean absorbing a $356 million breakup fee. Valeant countered with a new offer of more than $11 billion, prompting Endo to walk away.

The auction of Pharmacyclics drew heavyweights Johnson & Johnson and Pfizer Inc., prompting AbbVie to outbid them by roughly $1 billion to seal the deal, people familiar with the matter said.

Health care accounted for $425.4 billion, or 12%, of global deal volume in 2014, making it the most-active sector then, too. Much of the activity was spurred by so-called specialty-pharmaceutical companies, which make treatments for rarer ailments, buying foreign rivals in order to shift to lower-tax jurisdictions. When the Treasury Department in September cracked down on the deals, known as inversions, some advisers worried health care's hot streak would falter.

But that hasn't happened, in part because many companies that completed inversions before the crackdown--and as a result aren't subject to it--are now striking deals for U.S. companies they can absorb into their lower-tax structures. In the Salix auction, three of the bidders, including Valeant, had inverted or were in the process of doing so.

"The large 'specialty-pharma' companies are well positioned to consolidate," said Gregg Lemkau, the co-head of global M&A at Goldman Sachs Group Inc. "They continue to demonstrate an ability to acquire effectively, drive out costs and boost earnings growth."

In terms of mergers work, as of midday Tuesday, Goldman Sachs and J.P. Morgan Chase & Co. were in a virtual dead heat, with around $208 billion in announced deals globally across all sectors, according to Dealogic. Morgan Stanley ranked third, with $162.3 billion. Bank of America and Lazard rounded out the top five advisers, with $138.2 billion and $122.6 billion in announced deals, respectively.

Write to Dana Mattioli at dana.mattioli@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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