NEW YORK ( TheStreet) - Just as stocks hit 2011 lows Monday, evidence arrived that the IPO and M&A markets have seen activity slow to their worst levels of the year. And unless overall financial conditions improve and the volatility gets dialed back, the deals drought could give way to a freeze.

According to quarterly numbers released by financial data firm Dealogic, global mergers and acquisition activity fell 19% in the third quarter, the poorest performance of the year after rising by more than 20% in each of the first two quarters of 2011. After starting on the best merger pace since 2008, M&A is now tracking at its worst level since the second quarter of 2010, making the risk of a double-dip in the deal market for 2011 a reality.

While falling back from the highs of this spring and summer, M&A is still growing for the year. Even counting this quarter's fall, deals are up 9% to $2.18 trillion compared to this time last year, Dealogic said. Whether the market will post growth this year overall though is a close call.

To break even for the year, another $640 billion in mergers will need to get done in the final quarter of the year -- a number that won't be easy to reach considering the deterioration that took place from July through September.

The IPO market isn't as hard to judge. It's already a bear market for companies trying to sell their shares to the public.

Global IPO activity has totaled $142.5 billion so far in 2011, down 8% from last year's equivalent total. The third-quarter contribution of $27.6 billion was the worst since the second quarter of 2009 when the economy was just about to emerge from the worst recession since the Great Depression.

It's also likely that IPO markets will continue to stall. Fearful of volatile stock markets and the low valuations investors are willing to pay for shares, companies pulled 221 offerings to go public in the first 9 months of the year, the highest number of withdrawn or postponed IPOs since 2008 when the global economy hung on the precipice. The data also reflects the summer's over-optimism that the bull market that drove stocks to near-term highs in late April would continue to last.

As a result of earlier deal-making gains, global investment banking revenue reached $55.2 billion for the first nine months of the year, up 14% from 2010. The data will be of little solace to investors who have been selling investment banks shares throughout the summer and fall. Third-quarter investment bank revenue was the lowest total since the first quarter of 2009 when markets and bank shares were at the nadir of the financial crisis.

In M&A markets, technology-related deal making was done at a roughly 34% premium, the highest of any sector according to Dealogic. Meanwhile, for IPOs, the first-day performance of newly public shares averaged out at a 22% gain in the third quarter, lower than the average 34% gain companies recorded in first-day trading at this time last year.

So far this year, real estate-tied mergers have led the way with $209.5 billion in takeovers recorded, almost 10% of the overall global M&A market and the first time it has been the leading merger sector. Mergers in the sector have grown at 32%, which was eclipsed only by the technology, chemicals and construction sectors that posted 40% gains year-over-year in 2011. Finance, telecom and oil and gas companies are the only areas where mergers are below levels reported a year ago.

The United States was the top deal country for M&A with $819.1 billion in mergers announced in 2011, roughly 38% of the overall market. Domestic M&A reached its highest level since the recession, growing at a 21% clip in the first nine months of the year. Healthcare was the largest sector for U.S. mergers after Express Scripts ( ESRX) paid $29.1 billion for Medco Health Solutions ( MHS) in July; the largest deal of the quarter and since March.

In the IPO markets, the Americas regained the no. 2 overall spot with a 31% market share, well below the 49% share that Asia-Pacific holds. In previous quarters this year, more than 80% of IPOs were done in the Asia-Pacific region.

-- Written by Antoine Gara in New York

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