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Executive chairman of Loblaw Cos. Ltd. Galen G. Weston speaks at a news conference in Toronto, July 15, 2013. REUTERS/Mark Blinch

MARK BLINCH/REUTERS

From Sobeys Inc.'s $5.8-billion purchase of Safeway Inc. to Loblaw Cos. Ltd.'s $12.4-billion acquisition of Shoppers Drug Mart Corp., high-profile deals can overshadow the fact that Canada is coming off its second slimmest quarter for mergers and acquisitions in two years.

Deal volumes in the first half of the year have been muted, with the second quarter's volume up just 10 per cent from the first quarter's $24-billion in M&A, PricewaterhouseCoopers noted in its quarterly deal-making trend report Friday.

Other parts of the world are also seeing limited activity, especially when it comes to financial firms. Year-to-date M&A in the financial sector has plummeted to its lowest point since 2002, according to data from Thomson Reuters.

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Despite relatively healthy stock markets (the S&P 500 is up more than 17 per cent this year), M&A activity at global banks is down 58 per cent from 2012 levels, and insurance deal activity increased by a meagre 4 per cent. These two industries combined account for half of all activity in the sector.

The big winning bank – if you can call it that amid these lazy levels – has been New York-based Morgan Stanley, which has risen to be the top adviser for financial M&A this year, from sixth place last year. The investment bank is also raking in deals in Canada, coming in as the top bank for M&A and advising on eight deals worth $13.7-billion (U.S.) in the quarter.

But the bread and butter of M&A in Canada doesn't come from the mergers that cross the billion-dollar threshold, and deals in the middle market are up from the dismal first quarter, both by volume and value, according to PwC. More and more of these smaller deals are coming from Ontario and Alberta, compared to the other provinces. The two now account for nearly 80 per cent of all activity.

What's coming next will be more of the same interest in high-yielding investments, PwC noted: "We anticipate more of the same in alternative asset acquisitions around the world from the voracious Canadian pension funds and the REITs and Canadian real estate investments are expected to maintain their popularity for the balance of the year."

(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)

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