NEW YORK ( TheStreet) -- With a 'fiscal cliff' looming and reports of a lost year in holiday season retail sales, dealmakers face an uncertain outlook for 2013 after a forgettable year in mergers and aquisitions. Still, with earnings and stock markets continuing to trend upward alongside a recovering U.S. economy there's reason for optimism that the New Year may revive animal spirits and push corporations and private equity giants into acquisitions. Investors should watch a near half-year takeover drama for struggling electronics retailer Best Buy ( BBY) as a proxy for the M&A market headed into 2013. A possible takeover could confirm the key expected drivers of the deals market, such as private equity and access to cheap buyout or merger financing. Meanwhile, a Best Buy buyout could also signal demand for blockbuster turnaround deals, amid a handful of beaten down former blue-chips like Research In Motion ( RIMM), Dell ( DELL), and social media busts such as Groupon ( GRPN) and Zynga ( ZNGA). Were no Best Buy deal to materialize after a takeover dance that started in early August, it could counter expectations that private equity giants will play an outsized role in M&A markets and might underscore the impact of the Fiscal Cliff and weak signs of holiday season sales on C-Suite aggression. After Best Buy founder and former chairman Richard Schulze proposed a $24-to-$26 a share takeover of the electronics retailer - Schulze has yet to make a formal offer - Best Buy's shares have fallen sharply on two disastrous earnings reports that show cash and earnings falling, amid online market competition and a weak market for PC-based products. After delays to a prospective takeover offer, Schulze and a still suspect consortium of private equity giants will have until February 28 to submit a real bid that could give investors and the company's management something to think over. So far TheStreet has criticized Schulze for slow playing a deal at the expense of ordinary investors . A chronology of the Best Buy buyout drama shows why the retailer may be a leading indicator on overall M&A markets. When Schulze first made his bid, analysts at Credit Suisse and Citigroup were skeptical he could find the debt financing or private equity interest to support what initially appeared to be a $8.8 billion bid. According to Citigroup's initial August calculations, Schulze would need $5 billion in debt financing. Meanwhile, Credit Suisse analysts estimated a takeover would need a further $4 billion in private equity support. Both pieces of a prospective Best Buy deal would near post-crisis highs in takeover financing. In a 2013, Ernst & Young targets private equity as a bright spot for dealmakers, amid expectations of a flat to declining M&A market. "As corporates continue to be risk averse, PE firms are the ones to watch and are a potential bright spot in 2013 as the down economy provides a good time to invest," said Richard Jeanneret, the vice chair of E&Y's transaction advisory practice, in the Dec. 5 report. In a follow up mid-December interview Jeanneret, who does not talk about specific companies or deals, said that M&A activity would likely also hinge on wider economic issues. "I think there is a huge pent up demand and desire for deal making. If we can get some economic clarity, as well as some optimism that European Union has seen the worst then I think we can see a run in M&A," said Jeanneret, who maintained skepticism of such a scenario and cautioned a messy resolution to the Fiscal Cliff could put corporations back on the sidelines.