'Fundamentals in Place' for M&A Activity: JPMorgan's Lee

There is “a lot of volatility with new credit facilities put into place that could spawn mergers," Jimmy Lee, vice chairman of JPMorgan Chase, told CNBC Tuesday.

But with some companies unable to finance themselves outside of Chapter 11 bankruptcy reorganization, we could see some “very creative, highly-structured deals,” he said.

According to Lee, there are three basic principles that typically get companies into trouble:

  1. Too much debt
  2. Too little liquidity
  3. Poor risk management

Lee tells investors to look at the way the business cycle works, in relation to when it bottoms and heads back up, adding, "the road to recovery is never straight."

However, Lee thinks the fundamentals are in place for a lot of M&A activity, but will start out slow because there is a lot of fear in the market due to financial reform, Europeand the Gulf Coast oil spill.

So, with lots of cash on company balance sheets and CEO confidence rising, Lee said to look out for big M&A deals to come for the "right companies at the right time."

The Strategy Session, hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.