While the number of deals fell off in the second half of the year (3,139 deals compared with 3,467 in the first six months), the dollar volume of the deals climbed to $237.7 billion compared with $209 billion in the first half, according to Thomson Financial/First Call. Year to date, some 6,606 M&A transactions have been reported in the U.S., down 14% from last year. Analysts note that any pickup in M&A activity next year is contingent on an improved equity market. And, of course, there are any number of factors that could derail the nascent recovery. A war with Iraq, for example, or another retrenchment in economic activity, could force firms to delay transactions until conditions become more favorable. Still, Walter Murphy, a senior vice president of investment banking at U.S. Bancorp Piper Jaffray, said he believes there are "several positive trends in place which should provide the foundation for strong momentum" in 2003. Given the modest number of deals completed over the last two years, Murphy said there is considerable pent-up demand. Private equity firms have an estimated $100 to $125 billion of uninvested capital, meaning more leveraged buyouts are a possibility. He also noted that while valuations seem depressed now relative to where they were in the late 1990s, multiples are actually more in line with historical averages. "We expect that high-quality, top-tier companies will continue to receive significant interest and achieve premium prices regardless of market conditions," he said.