Mergers and acquisitions are only one of several activities lagging in this anemic economic recovery that began five years ago. But just as every new year since 2010 has begun with the expectation of accelerating business activity, it has been accompanied by an anticipation of a surge in M&A activity.

George Kellner, who has been investing in this space since 1978 when he co-founded the merger arbitrage business at Donaldson, Lufkin & Jenrette, isn’t surprised. “Boards are conservative, so are corporate executives,” Kellner says.

The investor who founded Kellner Capital in 1981 has seen it all. Back when he left a law firm to co-found the risk arbitrage business at DLJ, there were only a handful of investors in the business, including former Treasury Secretary Robert Rubin at Goldman Sachs, Guy Wyser-Pratte at Bache and the infamous Ivan Boesky.

By the time Kellner Capital was up and running in 1981, the M&A boom of that decade was roaring. In the wake of the 1979 and 1980 gas lines, the cheapest place to buy oil was on the floor of the New York Stock Exchange. T. Boone Pickens was teeing up one oil company after another and investment bankers like First Boston’s Bruce Wasserstein and Joe Perella were seducing giant oil companies into bidding wars for them.

Later in that decade, Drexel Burnham Lambert’s Michael Milken would partner with corporate raiders and take the leveraged buyout structure from the private company marketplace into the public arena. The game evolved from the leveraged buyouts of the 1980s to the mega-merger stock swaps in the 1990s like Exxon-Mobil and GTE-Bell Atlantic, now Verizon. Eventually, new players like private equity investors would move to center stage.

Today’s M&A business doesn’t resemble the Wild West like it once did. “The business is more conventional and protocols are established,” Kellner explains. “There is no longer nearly as much uncertainty.”

That translates into smaller, more predictable returns. As a rule of thumb, merger investors typically shoot for returns of 2.5 times the riskless rate, though that formula has been affected by distortions caused by Fed policy. For years, the firm’s flagship vehicle has been the Kellner Catalyst hedge fund, which is available to high-net-worth investors.

As he watched the liquid alternative investments market expand over the last five years, Kellner saw an opportunity to attract mass affluent investors into a specialty asset class that doesn’t correlate closely to traditional equities and bonds. So in August 2012, he launched The Kellner Merger Fund mutual fund that returned about 4.74% in 2013. With a stronger economic climate and a return to normalized interest rates, returns could climb into the 8% to 10% range. The firm recently launched  The Kellner Long/Short Fund an will soon roll out The Kellner Event Fund.

Several decades ago, risk arbitrage funds could earn double-digit returns when bidding wars erupted. The downside was that negotiations collapsed with greater frequency. In recent years, Kellner says that “90% of deals get done.”

In the 1970s, the critical skill set was getting information legally. That’s one reason many risk arbitrageurs like Kellner and Robert Rubin of Goldman were attorneys who could quickly analyze legal documents.

Some arbitrageurs often dabbled in “rumor-trage,” by investing in rumored or potential takeover targets that might surge in value after a takeover bid was announced. Kellner Capital invests only in announced deals. At a conference last summer, he said he preferred to avoid some of the issues confronting “Mr. [Stephen] Cohen” of SAC Capital, which has been subjected to eight indictments for insider trading over the better part of the last decade.

“Today, the skill set involves analyzing and prioritizing a vast body information,” Kellner says. State securities laws have evolved and are no longer the roadblock they were in the 1980s, but antitrust concerns remain a critical factor.

Since the financial crisis, the risk aversion among individuals has pervaded corporate boardrooms. “Managers aren’t paid to take risk. Slow and steady wins the race,” Kellner says.

Evidence in recent months indicates that caution may be receding. Last year, companies that announced acquisitions saw their shares rise. That meant arbitrageurs and others did not reflexively buy the target and sell the acquirer as they historically had done. The equity market’s willingness to reward companies that displayed the confidence to step up and spend their cash hoards by acquiring other companies may signal conservative management isn’t getting the respect it did in the years immediately following the financial crisis.

Kellner himself expects an increase in both merger activity and capital expenditures. Moods in boardrooms could well be at an inflection point, where dividend increases and stock buybacks are getting stale as investors and directors look for more imaginative strategies.

Two of the big deals surfacing in 2014 are being led by a name from the past, John Malone of Liberty Media and its numerous affiliated entities. Charter Communications, in which Malone owns a 27% interest, was offering to buy Time Warner Cable (a deal fended off when Time Warner was instead bought by Comcast for $45 billion), while Liberty Media is seeking to buy the remaining shares of Sirius that it doesn’t own. The fact Comcast outbid Liberty Media indicates confidence is returning.

Industries experiencing major disruptions are natural candidates for consolidation and change in ownership, Kellner says. Obamacare is upending the health-care business and Kellner thinks hospitals, medical instruments and health-care technology firms could be ripe for takeovers.

Last year’s overall Christmas sales fell into line with predictions, but online retailers like Amazon continued to take share from traditional retailers. That’s why some retailers like Men’s Wearhouse and Joseph A. Bank both see the benefits of a merger as each one has tried comically to bid for the other. Significantly, bank financing remains tentative as fears about the future of brick and mortar retailing spook lenders.

One of the biggest changes in the takeover is the displacement of corporate raiders by shareholder activists. As Kellner sees it, the growing popularity of activist investing fits into the changing landscape of corporate governance.

Raiders emerged in the 1980s after a 12-year bear market for equities when managements and boardrooms in America had grown calcified. Stocks were selling at single-digit multiples and the U.S. was the world’s largest creditor. CEOs were safer in their jobs than Soviet Politburo members, and they could expect to work until 65 without being challenged unless they committed a monumental blunder.

While the raiders were opportunistic enough to see all this, they faced credibility problems of their own. “When you take over a company, you have to manage it,” Kellner explains. All too often, raiders were looking to make a quick profit by putting a company in play. In the rare instances where they actually bought a company, the operating results were decidedly mixed.

Many raiders earned “public opprobrium” when they launched takeover bids, Kellner recalls. “People didn’t always say nice things about Carl Icahn and Nelson Peltz.”

Whether it’s the desire for respectability and a decline in their appetite for risk, the degree of hostility directed at shareholder activists is muted compared to the reception accorded corporate raiders. Peltz has actually earned praise from executives and directors at Heinz and other targets. “The risk of being an activist is less than the risk of being a raider,” Kellner says. “Still, change of control is the ultimate nuclear option.”