Rush of megadeals masks M&A slowdown New Orleans is America's party town, where revellers go to forget about troubles and celebrate successes. So when bankers and lawyers descended on the Crescent City last week for the Tulane Corporate Law Institute, an annual gathering of dealmakers, they came ready to imbibe in the famous bars along Bourbon Street. On the face of it, there was ample reason to raise a toast. Megadeals, it seems, are back. In the first weeks of February, five deals worth more than $6bn were announced. Three of those - the sales of Heinz, Virgin Media and Dell - topped $20bn. After years of sluggish mergers and acquisitions, some dealmakers believed that these might be the opening salvos of a return to boom times. More big deals beckoned, and all of Wall Street seemed poised for a bout of sustained activity. Then everything went quiet. For nearly all of March, hardly a single meaningful transaction was announced. Just as quickly as the M&A markets had wound in their sails, the momentum was gone. Against this backdrop, the mood in New Orleans was mixed. Mark Shafir, global co-head of M&A at Citigroup, opened the event with a downbeat presentation, arguing that deal­making around the world had stagnated to near 2005 levels. Without a significant reduction in macro­economic and geopolitical uncertainty, he argued, sustained activity would be hard to find. "We're now in a fits-and-starts world," Mr Shafir says in an interview after his speech. Those beautiful curves moving up and to the right arguably are a thing of the past. First-quarter data confirm his dour thesis. Despite the flurry of megadeals, global M&A volumes were down 10 per cent in the first three months of the year compared with a year earlier, according to Mergermarket. Deals worth $374bn were announced in the first quarter, making it the slowest start to a year in a decade. Making matters more confusing, there are plenty of reasons why deals should be picking up. Consumer confidence is rising, the markets have recovered and corporate balance sheets are flush with cash. "The correlations are broken down," says Mr Shafir. A lot of historical indicators aren't working now. Mr Shafir's grim assessment did not stop dealmakers from enjoying themselves, of course. Some were spotted betting thousands of dollars at the Harrah's casino craps table. Others splurged on pricey bottles of Château Latour after a meal of spicy shrimp, local trout and bananas foster, prepared tableside in a private room. However, the spectre of another slow year for M&A remains. Unforeseen disruptions to global confidence, such as the Cypriot banking crisis, do not help matters. "There are plenty of reasons for boards to be cautious, particularly at a macro level - for example, they are worried about slow economic growth in Europe," says Vis Raghavan, head of Europe, Middle East and Africa banking at JPMorgan. European M&A activity worth $100.4bn was announced in the first quarter, down 14 per cent compared with a year earlier, according to Mergermarket. "This is very much the case of a stronger set numbers in the US and numbers that are softer in Europe and Asia," says Michael Carr, head of M&A, Americas, for Goldman Sachs. "The strength of the numbers in the US is driven by some large deals, and two of those three were really leveraged buyouts," he says, referring to the buyouts of Heinz and Dell. Deal volumes in the US were up 32.2 per cent to $165.2bn. Cross-border deals continue to account for a growing share of M&A, according to Mergermarket, making up more than a third of global volumes. Yet only one of the megadeals, Liberty Global's bid for Virgin Media, was cross-border. Some see renewed activity coming from activist investors, who are pressing companies to put cash to work, divest languishing business units and strike deals in an attempt to boost share prices. "Boards will be pushed to take action," says Chris Ventresca, senior dealmaker for JPMorgan. That wake-up call has happened. Although there may be fewer deals being done, some think those that do cross the finish line might be better conceived. "With the emphasis on good corporate governance, the activists, the judges and independent directors putting more scrutiny on justification of an acquisition, I'd like to think you get better outcomes," says Mr Shafir. And while it may be accepted that M&A will not come roaring back this year, dealmakers cannot help but be perennial optimists. "The big bang theory of M&A - that we're going back to 2007 because we had some big deals - is not the case," says Jim Woolery, who last month left as co-head of North American M&A at JPMorgan to take a top job at law firm Cadwalader, Wickersham & Taft. It's always lumpy, but I think there will be steady improvement this year. Additional reporting by Daniel Schäfer