Stocks to Watch In a Rising M&A Tide

NEW YORK (TheStreet) -- The recent deals for Dell(DELL) , Heinz(HNZ) , American Airlines(AMRPQ) and Virgin Media(VMED) may indicate to some a return of the mega-deal, after years of post-crisis C-Suite caution.

It certainly is a fun exercise to speculate where Warren Buffett might aim Berkshire Hathaway's(BRK.A) M&A elephant gun, after the 'Oracle of Omaha' said in March that his failure to make a large acquisition was among his biggest 2012 disappointments.

But given a trend toward smaller mergers and buyouts by corporations and private equity firms, investors may do well to continue to focus their M&A speculation on small and mid-cap companies.

Rising valuations for corporations across the Russell 2000 Index(RUT) and the Russell Midcap Index(RMCC) , a stabilizing economic outlook, an imperative for revenue growth and attractive financing, may continue to drive small and mid-cap deals in 2013, according to a March 4 screening of M&A targets by Citigroup analyst Scott Chronert.

Last year, M&A removed about 5% of the Russell 2000's total equity value -- $58 billion -- and helped drive the 14.6% return for the index, with a similar amount being acquired from the Russell Midcap index, according to Chonert's calculations.

"We continue constructive on the outlook for small and midcap M&A activity during 2013," Chronert wrote.

"Typically, small cap will be characterized by more deals, but with smaller size. Conversely, deal count in mid cap is typically lower, but with offsetting higher deal values," the analyst added, while noting Buffett and 3G Capital's $23 billion deal for Heinz has driven mid-cap M&A this year.