Bond sales are at a record, equity markets are at year-highs, private equity firms are sitting on huge cash piles -- Blackstone alone has $29 billion -- and banks are lending to each other again.

The ingredients should all be there for a resurgence of cash-driven mergers and acquisitions. But instead, the market is in hibernation.

So far the value of all M&A deals completed this year totals $990 billion. You have to go back to 2003 -- when the total for the year was $1.23 trillion -- to find a figure this low, according to Thomson Reuters data.

Of this, some $364 billion -- just 37 percent -- were cash deals, marking a dramatic shift in the mix of recent years when cash has dominated.

The main spanner in the works is the still dire state of banks' balance sheets and the crippled syndicated loan market. This has kept a tight lid on cash bids of any size, with the mega merger or takeover a distant memory.

Most banks are doing all they can to shrink their balance sheets, guard against problem exposures and to lend to their best clients. As a result, global syndicated loan volumes hit their lowest monthly volume since 1993 in July.

True, corporate bond issuance is booming and companies are raising equity, but this is not going to be enough to fill the void. And even if companies are confident of being able to fund their purchases with bonds, they first need to find a bank to give them a bridge loan.

The absence of debt finance has all but killed off fully-funded hostile cash bids. One consequence has been a shift to the type of bear hug Xstrata is attempting on Anglo American, where a attempts to win shareholder support for a deal before launching an offer.

Meanwhile, other companies are assembling warchests to give them the opportunity to move quickly when they spot a bargain. German chip-maker Infineon, for instance, recently raised equity to repay borrowings and prepare a stash of dry powder for acquisitions.

Another approach is to raise equity by partially listing subsidiaries. Spanish bank Santander is seeking to float part of its Brazilian unit and British insurer Aviva is doing the same with its Dutch operation, Delta Lloyd. Not only does this raise some fresh capital to bolster the parent's position, but gives the unit concerned an acquisition currency without drawing on its cash-strapped parent.

An alternative is to buddy up with a cash-rich financial investor. Germany's Bertelsmann, for example, teamed up with KKR to form a music rights management company designed to prey on distressed competitors.

One area where buyers don't always have to put up that much cash for control is in distressed companies. In some cases, banks are willing to hand over the keys so long as the acquirer is willing to inject some more cash into the company to put in on a stable footing. One example is the acquisition of Pearl by special purpose acquisition company Liberty International, where Liberty put in fresh cash, and the banks wrote down some of their debt.

Vulture investing isn't going to spur much of a recovery in overall volumes, however. That's probably a good thing. A great deal of the hyperactive M&A of recent years was wasteful and left businesses saddled with too much debt. Moreover, many businesses are more concerned about bolstering their balance sheets and steering a steady course through the recession rather than empire-building.

There remains another problem with distressed M&A: the relative shortage of targets. Banks have been reluctant to get too tough with troubled borrowers for fear of realising further losses -- so rather than foreclose they have often been prepared to amend debt terms and relax covenants. This has allowed many to ride out the storm so far. And for less distressed sellers, market volatility has made it harder to agree on value.

Like the banks, CEOs are being equally cautious about what they do with their cash. Those who have survived the financial crisis aren't about to be caught napping a second time. They may be tempted into share offers to grab assets they think worth acquiring if they see greater market and economic stability returning, but most will be keeping their cheque books deep in their inside pockets for now.

-- By Neil Unmack and Alexander Smith

European bankers may be having more conversations that could lead to M&A than six months ago, but this week’s deal figures from Thomson Reuters still make dismal reading.

So far this year, European M&A has been worth $356.6 billion, a 51% fall compared to last year at this time. Excluding government investments, merger activity in Europe totals $239.1 billion, a 67 percent decrease from 2008 levels.

Here is another of this week’s data points:

“Germany’s E.on has agreed to sell its natural gas distribution subsidiary, Thuega AG, to a group of German utility companies for $4.1 billion, topping the list of worldwide mergers this week. Goldman Sachs, which advised Thuega, and @visory Partners GmbH, which advised the consortium, could share an estimated $30 million to $35 million in advisory fees on completion of the deal.

The acquisition of Friends Provident by Resolution is a reminder that financial services deals have not gone away. A steady stream of deals have made headlines in recent weeks.

On Thursday an online report said Prudential Financial Inc is in the early stages of talks with KB Financial to sell its South Korean brokerage arm, a deal that could fetch an estimated $680 million. Here’s the Reuters story.

Other deal-related stories appearing in the media on Thursday include:

State-run miner Coal India Ltd plans to raise up to 60 billion rupees ($1.25 billion) by selling 10 percent of its equity through an initial public offer expected within a year, the Business Standard reported on Thursday.

Menswear retailer Trinity, controlled by the parent of Li & Fung, has revived a listing plan and aims to raise at least US$200 million in a Hong Kong IPO before the end of this year, a Hong Kong newspaper reported on Thursday.

Insolvent German retailer Arcandor’s former banking unit Valovis has applied for 500 million euros in state guarantees, the Handelsblatt newspaper said.

India’s Reliance Industries has exited an Oil and Natural Gas Corp-led consortium that was to bid for a 40 percent stake in an oil field in Venezuela, the Economic Times reported.

Buyout firm Resolution raises its offer for UK insurer Friends Provident to about 2 billion pounds, and the two sides start talks about a possible deal.

The following are M&A related stories reported by Reuters and other media:

Lloyds Banking Group may consider a multi-billion pound share issue as part of a partial withdrawal from the government’s asset protection scheme, according to a report in the Sunday Times.

U.S. power producer Dynegy will sell nine U.S. power plants to its one-time development partner LS Power Associates, the Wall Street Journal says.

Japan’s largest chemicals firm Mitsubishi Chemical is in talks to buy resin maker Mitsubishi Rayon in a deal worth up to $2.1 billion, the Nikkei business daily says.

Financial services firm Edelweiss Capital is in talks with Japanese insurance group Tokio Marine for a possible joint venture in life insurance, a newspaper reported.

German railways operator Deutsche Bahn is unlikely to list on the stock exchange before 2013, the group’s chief executive said in an interview. Click here for the Reuters story.

Libya and India’s Essar are both bidders for Shell’s Stanlow refinery in the UK, according to a report in the Sunday Times. Click here for the Reuters story.

UK stockbroker Astaire Securities, formerly known as Blue Oar, is mulling a bid for rival Daniel Stewart, according to a report in the Independent on Sunday.

An unusual Credit Suisse Group compensation plan could lead to hefty year-end payouts for bankers, The Wall Street Journal said. The newspaper said that the bank told 2,000 top bankers that a $5 billion fund of toxic mortgages and bonds, which it granted as a big portion of 2008 pay, has returned 17 percent since January, citing people familiar with the matter.

The following M&A related stories were reported by media on Friday:

French advertising group Publicis  is poised to buy U.S. digital specialist Razorfish from Microsoft Corp, Les Echos reported in its Friday edition.

Citigroup Inc may give control of its Phibro commodities business to Andrew Hall, the energy trader making headlines for demanding a $100 million payday under his contract, The New York Times said, citing a person with knowledge of the negotiations.

British care home operator Four Seasons Healthcare is close to an agreement with creditors to halve its 1.5 billion pounds ($2.55 billion) of debt, the Financial Times reported.

Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group to help manage and break apart the insurer, the Wall Street Journal said, citing its own analysis.

The following M&A related stories were reported by Reuters and other media on Thursday:

Jewelry retailer Finlay Enterprises filed for Chapter 11 protection and said it would sell its assets in an auction supervised by the bankruptcy court. The company listed assets and debt in the range of $500 million to $1 billion in its filing, Reuters reported.

Indian cellular firm Aircel, 74 percent owned by Malaysia’s Maxis, has shortlisted four firms including American Tower and Bharti Infratel to conduct due diligence as it looks to sell all or part of its tower operations, Reuters said.

China South City Holdings, an operator of a wholesale and logistics centre in Shenzhen, is expected to revive its Hong Kong listing plan next month, raising $500 million for expansion, the South China Morning Post said.

UK broadcaster ITV is set to sell social networking site Friends Reunited to DC Thomson, publisher of the Beano comic for 25 million pounds, the Financial Times said.

Australia and New Zealand Banking Group Ltd will likely clinch a deal this week to buy some Asian assets from British lender Royal Bank of Scotland Group for about $775 million, a source briefed on the situation told Reuters, marking it the Australian bank’s biggest overseas purchase.

In other M&A related stories reported by other media on Monday:

British-based, US-listed cable operator Virgin Media is considering a secondary listing of its shares in London to attract UK-based investors, according to a report in the Times newspaper. Virgin will make an announcement about its decision at its second-quarter results this month, the report said.

The biggest private equity groups are sitting on $400 billion of debt that needs to be repaid over the next five years, putting the future of some of the largest buyouts in doubt, the Financial Times said, citing data from S&P LCD.

Yahoo Inc, which last week announced a Web search deal with Microsoft Corp , will invest money from reduced marketing and infrastructure costs into its display ad, content and mobile services technology, its chief executive Carol Bartz told the New York Times in an interview.

Andrew Hall, the trader behind Phibro LLC, the energy trading arm of beleaguered bank Citigroup Inc, is pushing for a “quiet divorce” from his parent company and has had preliminary talks with one potential suitor, the New York Times said.

Private equity firm Candover is considering plans to inject fresh funds to support its investment in DX Group, a UK postal services company it bought two years ago for 347 million pounds, the Financial Times reported.

Time Warner Inc (TWX.N), which plans to spin off AOL by the end of the year, said in a filing with the U.S. Securities and Exchange Commission that it paid $283 million for Google Inc’s (GOOG.O) 5 percent stake in AOL.

In other M&A related stories reported by Reuters and other media on Tuesday:

German flagship carrier Deutsche Lufthansa (LHAG.DE) said it has applied with the Austrian Takeover Commission to extend a deadline for a planned deal to acquire Austrian Airlines (AUAV.VI) by a month to Aug. 31. Click here for a Reuters story.

Private equity group CVC Capital Partners was prepared to offer up to 1.5 billion euros ($2.1 billion) for Anheuser-Busch InBev’s (ABI.BR) Central and Eastern European assets, ahead of a Monday deadline, newspaper De Tijd reports. The private equity firm was in talks with 13 banks, including HSBC, Unicredit and Calyon to secure a loan of at least 700 million euros. While TPG Capital was still in the running, KKR had dropped out of the proceedings.

China National Offshore Oil Corp (CNOOC) (0883.HK) said it would ratchet up its efforts to acquire more energy assets abroad in the second half and next year to secure oil supplies for the world’s second-largest energy user. Click here for a Reuters report.

Sweden’s Ericsson has won the race for the wireless assets of bankrupt Nortel Networks Corp, paying $1.13 billion for the crown jewels of the on-time Canadian telecom star.

In other M&A related stories reported by Reuters and other media on Monday:

Volkswagen (VLKAF.DE) is considering a 4 billion euros ($5.7 billion) capital increase to offset the credit rating impact of its merger with Porsche, Financial Times Deutschland reports.

Commerzbank (CBKG.DE) said it has sold Dresdner Bank (Switzerland) to the Liechtenstein-based LGT Group. LTG said the combined Swiss operations would manage client assets totalling almost 20 billion Swiss francs. Click here for a Reuters story.

ArcelorMittal (ISPA.AS) is exploring a joint venture spinoff of its stainless steel business, worth an estimated $3 billion, in a sign that the world’s biggest steelmaker is contemplating scaling back in response to the recession, the Financial TImes reports.

French drugmaker Sanofi-Aventis (SASY.PA) has agreed to take control of unlisted Indian vaccines group Shantha Biotechnics, a French subsidiary of Merieus Alliance, valuing the business at 550 million euros ($781 million). Click here for the Reuters story.

Health insurer Aetna Inc (AET.N) is looking to sell its pharmacy benefits management business , the Wall Street Journal said, citing people familiar with the matter.

Belgian private-equity firm RHJ International (RHJI.BR), a bidder for carmaker Opel, is not ruling out selling Opel back to U.S. parent General Motors after returning it to health, RHJ’s chief executive Leonhard Fischer told Frankfurter Allgemeine Sonntagszeitung.

British bus and rail firm Stagecoach (SGC.L) has appoint Deutsche Bank to draw up plans for an all-share takeover bid for rival National Express (NEX.L), trumping an expected 600 million pound bid from Spain’s Cosmen family and private-equity firm CVC, the Sunday Times reported.

China’s Sinochem approaches Australian farm chemicals group Nufarm about a possible takeover, the second time Nufarm gets interest from a Chinese firm in the past two years. The Australian group has a market value of almost US$1.9 billion, and the news sent its shares soaring.

Other deals reported by Reuters and other media on Friday included:

Spain’s Cosmen family and private equity group CVC have made a joint takeover approach for British bus and rail group National Express, the Financial Times reports, citing people close to the situation.

Hedge fund Fortress Investment Group is looking to go on an acquisition drive, which may include buying banks, insurers, and other hedge funds and financial firms, the FT reports, citing a memo.

Troubled U.S. lender CIT Group is most likely to sell its aviation and rail finance operations, the Wall Street Journal reports, citing sources familiar with the matter.

Three private equity firms have agreed to buy a combined near 10 percent stake of China UnionPay as the country’s monopoly card payments service provider aims to go public next year, sources with direct knowledge of the deal tell Reuters. CITIC Private Equity, V-Stone Investments and a local investor are among the buyers, the sources say.

Sony will likely invest more than $1.1 billion in a planned liquid crystal display TV panel venture with Sharp Corp, the Nikkei business daily reports. For the Reuters story click here.