Mergers and acquisitions activity surged in the fourth quarter, but it wasn’t enough to prevent a decline for the year overall, according to the latest data from mid-market investment bank, Crosbie & Co.

The firm reports significant increases in both deal activity and total transaction value in the quarter. There were 277 transactions announced during the quarter, worth a total $56.7 billion. This represents an increase of 34.5% in deal volume, and 38.6% increase in value, from the 206 transactions worth $40.9 billion announced in the third quarter.

“The lift in activity this quarter is one of the strongest on record in the past nine years and was driven by higher activity in most industry groups along with a record level of transactions by financial sponsors,” Crosbie says.

However, despite the strong fourth quarter results, total M&A activity for the year declined by 10.9% compared to 2011, Crosbie reports. For the full year, there were 978 announced transactions, compared to 1,098 deals in 2011. Yet, the value of M&A transactions actually increased 15.2% year over year, to $183.4 billion from $159.2 billion in 2011.

“The strong rebound in M&A activity this quarter coincided with the recovery of stock indices and reversed the malaise that we experienced for most of 2012,” said Ed Giacomelli, managing director at Crosbie. “As we have said in prior quarters, the conditions for deal making were present throughout the year; however the recent surge in activity demonstrates that sentiment is turning.”

There were 13 so-called “mega deal” transactions (deals worth at least $1 billion) in the fourth quarter, for an aggregate value of $30.7 billion, Crosbie reports. And, it notes that Canadian pension funds were very active in M&A in the quarter, participating in 10 transactions, four of which were acquisitions of real estate assets.

“The impressive level of activity by financial sponsors and pension plans reinforce the fact that capital groups have plenty of cash to invest,” added Giacomelli. “In particular, in the current interest rate environment real estate remains an attractive asset class.”

The oil & gas sector was the most active in the quarter with a total of 66 deals (worth $15.8 billion), which accounted for 23.8% of total M&A activity. It was closely followed by the real estate sector, with 64 transactions announced valued at $12.2 billion.

Crosbie notes that cross-border transactions also continued to be a critical component of the Canadian M&A market this quarter, accounting for 43% of all announcements; with Canadian firms continuing to acquire more foreign firms than foreign-led takeovers of Canadian firms.