The M&A boom we are seeing right now is clearly propelling the market higher. Firms like Blackstone have billions of dollars to put to work and they can't raise more money until what they have now gets spent. As a result, you see prices like this being paid for Hilton. For a 40% premium, they had to say "yes" to Blackstone. If the offer was 20%, maybe they pass, but not 40%.
And this is a major reason why the market has been so good lately. Private equity firms need to spend their cash hoards and aren't afraid to overbid if it means getting a deal done. The companies getting bought out jump, helping the market. The stocks considered next in line for a bid get a pop on the rumors and speculation, and short sellers have to scramble to cover any positions that could possibly get a bid. You can't afford to risk being short a name like Hilton before a Blackstone bid comes along.
Liquidity will dry up at some point, deal flow will lighten up, and market returns might be subdued, but there is really no way to know when exactly that will happen. It is clear the private equity firms themselves think we are in the late innings, or else we would not have seen Blackstone go public and KKR file for an IPO just yesterday. Until the game is over, though, there is plenty of liquidity to keep stock prices fairly high.
Investors should simply focus on values in the marketplace. Maybe one of your companies gets a bid, maybe not, but it would be wise to make sure you are comfortable with your investments even if they remain independent. Unless you think you are the ultimate market timer, I would avoid the private equity IPO market, including Blackstone, KKR, and the others that will surely follow suit as long as the new issue market can support them.
Disclosure: Author has no position in above-mentioned companies at the time of writing.