The transaction value of mergers and acquisitions fell 22% last year, but increased 15% during the fourth quarter. Investment bankers are hoping the late surge points to a stronger flow of deals this year.

Of course, bargains aren t as abundant as a year ago, with the world s stocks up 26% in value, judging by the MSCI Barra World Index. Then again, suitor companies often use their shares to make purchases, which lessens the pain of buying when share prices are broadly high.

The three companies below seem attractively priced using the math of merger-and-acquisition pros. Each has a low EV/Ebitda ratio. EV is enterprise value, or the cost to own a company net of its debt and cash. Ebitda stands for earnings before interest, taxes, depreciation and amortization, and is useful for comparing companies core earnings power. A low EV/Ebitda ratio, then, suggests a company has a modest takeover price relative to its profit potential. The companies below are also below average size for their industries.

Cardinal Health

As a drug distributor, Cardinal Health (CAH) competes with companies like AmerisourceBergen (ABC) and McKesson (MCK), and as a distributor of medical supplies it competes with Owens & Minor (OMI). Both business lines have steady sales but low margins and benefit greatly from scale. Cardinal is expected to generate about $620 million in free cash this year and $675 million next year, after subtracting for dividend payments, but before taking out for share repurchases. Shares yield 2.2% and trade at 16 times 2010 earnings.

Radio Shack

Radio Shack (RSH), formerly Tandy, which now refers to its electronics chain as simply The Shack, is an odd retailer. It has more than 4,400 stores, about four times the number of Best Buy (BBY) stores, but Shack locations are often too cramped to run blowout television sales, and while a 25-pack of rectifier diodes is surely priced profitably at $2.79, it doesn t exactly put sales clerks in danger of a customer stampede when the doors open. The company does, however, deliver plenty of free cash worth about 10% of its stock market value each year. And the store format is fine for a cell phone dealer, which is largely what The Shack has become.

Lorillard

If not for killing the customers, the cigarette business would be ideal for investors. Lorillard (LO), the third-largest U.S. manufacturer, generates around 8% of its stock market value in free cash each year, has the widest profit margins in the business and pays a 5% dividend. Its customers are extremely loyal, industry research shows. Almost all of the company s sales come from a single brand, Newport, which is a menthol (minty) cigarette. That s both a blessing and curse. Newport is especially popular among young smokers and minorities, studies show, which gives the company an advantage in terms of early branding and population growth. Lawmakers aren t keen on cigarettes that appeal disproportionately to the young, though, and could conceivably create special restrictions for menthol cigarettes, or even an outright ban. Unlikely, wrote Deutsche Bank analyst Andrew Kieley last September, upon initiating coverage of the stock with a buy recommendation. Some 30% of smokers prefer menthol, making the business too large to squash without a major contraband trade. According to Kieley, Lorillard s debt reduction, share repurchases and dividends look likely to pay off for shareholders.