So far this year, $219 billion worth of deals have been announced, more than double the level over the same time last year, according to Dealogic. The value of deals is also slightly above the same period in 2007. And that turned into a record year, with the value of deals reaching $1.6 trillion.

Those looking to profit on deals by picking companies before they're taken over should know it's not easy. But there are guidelines for choosing possible M&A targets. One is a reasonably valued stock, not so high that it's likely to scare off buyers.

Other signs are low debt and a history of generating lots of cash. Those are key for buyers who borrow heavily to finance deals, says Hottovy, the Morningstar analyst. Their debt can be repaid with the money coming out of target companies.

Among the picks in a Morningstar report co-authored by Hottovy last month:

â¿¿ Kohl's: The department store chain has strong cash flow and its stock trades at 10.7 times per share earnings in the previous 12 months, which Morningstar considers attractive. The average for S&P 500 companies is 17 times.

â¿¿ Chesapeake Energy Corp.: The second-biggest U.S. gas producer is a target of investors looking to get the share price up. Embattled CEO Aubrey McClendon was pushed out last month. The stock is down 12 percent in the past 12 months.

â¿¿ City National Corp.: Morningstar likes that the Los Angeles-based bank courts wealthy business owners as customers and has increased earnings per share by 63 percent in two years. The stock is up 17 percent in the past 12 months.

Conditions seem ripe for plenty more deals.

Borrowing money to buy has rarely been cheaper since interest rates are near record lows. And many companies can pay for M&A out of their own pocket. Companies in the Standard and Poor's 500 index have more than $1 trillion in cash on their books, up 66 percent in five years.

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