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) -- The recent deals for


(DELL) - Get Free Report





American Airlines

( AMRPQ) and

Virgin Media


may indicate to some a return of the mega-deal, after years of post-crisis C-Suite caution.

It certainly is a fun exercise to speculate where Warren Buffett might aim

Berkshire Hathaway's

(BRK.A) - Get Free Report

M&A elephant gun

, after the 'Oracle of Omaha' said in March that his failure to make a large acquisition

was among his biggest 2012 disappointments


But given a trend toward smaller mergers and buyouts by corporations and private equity firms, investors may do well to continue to focus their M&A speculation on small and mid-cap companies.

Rising valuations for corporations across the

Russell 2000 Index


and the

Russell Midcap Index

( RMCC), a stabilizing economic outlook, an imperative for revenue growth and attractive financing, may continue to drive small and mid-cap deals in 2013, according to a March 4 screening of M&A targets by Citigroup analyst Scott Chronert.

Last year, M&A removed about 5% of the Russell 2000's total equity value -- $58 billion -- and helped drive the 14.6% return for the index, with a similar amount being acquired from the Russell Midcap index, according to Chonert's calculations.

"We continue constructive on the outlook for

small and midcap M&A activity during 2013," Chronert wrote.

"Typically, small cap will be characterized by more deals, but with smaller size. Conversely, deal count in mid cap is typically lower, but with offsetting higher deal values," the analyst added, while noting Buffett and

3G Capital's

$23 billion deal for Heinz

has driven mid-cap M&A this year.

Using a screen for positive free cash flow and low debt companies, and another one for underperforming stocks and fundamentals relative to peer groups, Citigroup highlighted actuarial firm

Towers Watson

(TW) - Get Free Report

, media conglomerate



, payments specialist

Total System Services

(TSS) - Get Free Report

, home retailer


(WSM) - Get Free Report


American Eagle Outfitters

(AEO) - Get Free Report


Packaging Corporation of America

(PKG) - Get Free Report

, as possible private equity buyout targets with market caps in excess of $4 billion.

The team of Citigroup analysts also see underachieving companies such as

Abercrombie & Fitch

(ANF) - Get Free Report

, car parts supplier


(VC) - Get Free Report


Allscripts Healthcare Solutions

(MDRX) - Get Free Report

, retailer




Fuel Systems Solutions


and gaming software maker

Take-Two Interactive Software

(TTWO) - Get Free Report

, as notable small and mid-cap deal targets in 2013.

Those firms may be the target of a strategic or private equity suitor because of low valuation multiples, higher than free cash flow yields and debt levels below peer trends, according to the Citigroup analysts, who have "buy" ratings on each of the firms mentioned.

Citigroup's forecast for a steady flow of small and mid-sized deals would reflect a continued trend for private equity firms to target in the $1 billion to $5 billion range, and for corporations to look at tuck-in acquisitions rather than transformative mergers.

Even deals the size of Dell's proposed $24.4 billion takeover and a

failed attempt

to take

Best Buy

(BBY) - Get Free Report

private indicate that private equity firms are stretched to contribute more than $1 billion in equity to a buyout, as leverage levels come down.

Despite an increased number of deals during 2012, vverall M&A activity around the world ended the year roughly flat from 2011 levels, according to data provider



While M&A globally came in at about $2.7 trillion -- below 2008 levels in excess of $3 trillion -- the number of deals done exceeded levels from four years ago.

Even in the absence of blockbuster mergers like Heinz or Dell, private equity firms such as

Carlyle Group

(CG) - Get Free Report

, banks including

Goldman Sachs

(GS) - Get Free Report

and boutiques like

Evercore Partners

(EVR) - Get Free Report

, were hard at work last year.

So a surge in 2013 deal making may not be such an aberration from the previous year. Dealogic data show that the nearly $1 trillion in transactions in the fourth quarter of 2012 was the highest quarterly total since the same period five years earlier.

Those who expect that merger and activity will continue to rise with overall markets and the economy, may do well to focus on small and mid-cap targets given the constraints on private equity and a more cautious stance to mergers taken by boards across Corporate America.

For more on M&A trends, see what

2013's mega-deals really mean

. Also see

Morningstar's top 2013 M&A picks


-- Written by Antoine Gara in New York

Follow @antoinegara