Turmoil in financial markets are dominating the merger and acquisition industry, both by sparking deals in the financial sector and fundamentally altering the industry’s league tables.

According to the research firm Mergermarket Group, the financial services sector has gone from being the quietest sector in M&A to the busiest as the credit crunch wreaks havoc in the global banking industry. “The past few weeks have seen a string of large deals negotiated and agreed in a very short space of time, the most recent being Citigroup’s agreement-in-principle to acquire Wachovia,” it notes.

Meanwhile, investment banks such as Lehman Brothers and Merrill Lynch have also seen their franchises disappear in short order, it says. As a result, Bank of America is poised to vault to the top of Mergermarket’s global M&A league tables. Citigroup will also be boosted by its takeover of Wachovia while Barclays Capital is set to become a leading deal maker thanks to its acquisition of Lehman Brothers’ U.S. investment banking business.

At the same time, the firm observes that “the long-standing dominance of Goldman Sachs and Morgan Stanley is bound to be challenged as the two investment banks are now in the process of adopting a new business model. Both firms have seen their traditional pre-eminence in European and Asian M&A take a backseat to firms such as Deutsche Bank.”

In Canada, RBC Capital Markets led the league tables by value, followed by CIBC World Markets and Merrill Lynch, according to Mergermarkets. In terms of deal volume, CIBC World Markets was tops, followed by RBC and Scotia Capital.

European M&A activity has exceeded that of North America in the year so far, the firm notes. But, U.S. M&A looks set to outperform in the shorter term, driven in part by aggressive consolidation in the troubled banking industry. U.S. firms in the technology and pharmaceuticals sectors were already positioned to be highly-coveted takeover targets for foreign companies, Mergermarket notes.