Global M&A volume dropped 22 percent in the first quarter of this year from the same 2007 period, to $861.2 billion, the lowest volume since the first quarter of 2005, according toDealogic.
"For the next quarters, I expect M&A activity to be subdued. I don't think we'll see a recovery in the next few quarters," Peter Cornelius, head of economic and strategic research at Alpinvest told CNBC.com.
"We do see a number of deals but what has been a key force in the M&A market, the large buyout deals, are gone. I don't think this will change any time soon," Cornelius said.
Financial sponsor M&A buyouts, or private equity deals, fell 65 percent in the first quarter to $63.1 billion compared with the first quarter of 2007, as the credit crunch made cash scarce.
Buyout volume fell sharply to account for only 7 percent of world deals in the period, downfrom 16 percent in the same period last year.
And as a sign that the cash shortage is deepening, private equity deals fell 16 percent compared to the fourth quarter of last year, when the crisis was just beginning.
But this leaves room for strategic investors to step in and buy deflated assets, and for industry consolidation.
"The M&A market is normalizing right now, I wouldn't over-dramatize it," Cornelius said. When stock markets stabilize, he added, more players will probably jump in, but for the moment "if you think that an asset is overpriced, it doesn't make sense for you to buy that asset."
The corporate sector overall has "a healthy balance sheet" and consolidation will continue, he added.
"One could speculate that, with what happened in the financial markets, this could trigger more consolidation," Cornelius said. "I would anticipate that financials and energy will remain at the forefront of M&A activity."
Another target sector would be that of consumer staples, he added, because the recession threat in the U.S. has hit consumer companies quite hard. The weakness of the dollar may be another factor bringing companies, mainly from Europe, shopping for bargains across the pond.
"Net capital inflows into the US have increased over the last two-three years, the exchange rate has had a big effect on the pricing of U.S. assets," Cornelius said.
Deals in emerging markets are gaining ground, with acquisitions by companies in developing markets into developed nations totalling $51.5 billion in the first quarter, up 91 percent on the same 2007 period, according to Dealogic.
China was the top emerging-market investor, boosted by the acquisition of UK-based Rio Tinto by Aluminum Corp of China.
Acquisitions into emerging markets have also risen in the first quarter, accounting for 21 percent of global volume.
Asia, Latin America, the Middle East and Central and Eastern European countries are all hot spots, Cornelius said, and for countries that recently joined the European Union, "their risk profile has improved quite significantly in recent years."