Bulls Are Running, So—Where Are the Mergers?

The U.S. stock market is sitting at four-year highs but this bull market has failed to spark a any increase in mergers and acquisitions this year.

Negotiating Pay
Negotiating Pay

Worldwide announced M&A activity is down 15 percent to $1.67 trillion this year through August compared to the same period last year.

And Mark Shafir, co-head of global M&A at Citigroup isn’t expecting any major pick-up in activity.

“The biggest issue at this point is that we don’t see a catalyst,” Shafir told CNBC on Wednesday. “We’ve got problems in Europe and we have a presidential election in the United States.” Both are keeping executives from doing deals until there’s greater certainty, he said.

Underscoring the lackluster market, there were only 33 transactions this year worth more than $5 billion, the lowest year-to-date total since 2004, the Citi banker said.

Concentration is also high — both regionally and by industry. Half the M&A market from an industry perspective has been industrial, consumer and energy, Shafir noted. Moreover, six countries — including the UK, U.S., Germany and China — account for 79 percent of the deals over $1 billion. (Read More:Glencore Raises Offer for Xstrata in Surprise Move.)

In a healthy market, all industries and all regions generally perform well, Shafir pointed out. “When you get this kind of concentration, it suggests the market is spottier and that is what we feel right now,” he said.

Nonetheless, Chinese and Japanese companies making acquisitions abroad and private equity deals are two bright spots, Shafir noted. Since May, there have been more private equity deals worth $1 billion or more than the market has seen in the past few years, he said.

There’s little sign that the rest of the market will start to open up, though. Typically, M&A activity is correlated with consumer confidence and the S&P 500 and is inversely correlated with the VIX , Shafir said. Since October 2011, the S&P has jumped and the VIX has tumbled, but M&A activity has not rebounded.

“So some of the things we traditionally correlated to are not correlating right now,” he said. “It’s not great, but it is what it is.”