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) 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 Dealogic.

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), banks including Goldman Sachs ( GS) and boutiques like Evercore Partners ( EVR), 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

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