By Rachel Sanderson and Eleanor Wason

"I'm very confident not much is going to change in the next six to nine months," said James George, a partner at strategy consultancy OC&C specializing in the retail and consumer goods sectors.

"Beyond that it is quite difficult to predict because people are keen to get back in. Private equity is keen to second guess the starting whistle because someone is going to make a lot of money on the rebound."

European retail shares <.SXRP> have shed nearly 30 percent of their value in the past six months, almost equal to the losses sustained by the European bank stocks <.SX7P>.

Still, retail stocks are predicted to have further to fall because the impact from the credit crunch and rising commodity costs is only just starting to be felt by consumers.

Casualties are already evident in the British market. Shares in sofa retailer ScS Upholstery fell more than 50 percent last week on complications with its financing related to the credit crunch.

While deals for private equity-held companies such as New Look and Pets at Home have been put on the back burner.

"We will see M&A starting up again substantially when the credit crunch is over and that will be when the financial markets are convinced most of the bad assets have been fully accounted for," said Ira Kalish, Director, Global Economics, Deloitte Research.

First movers among potential buyers are expected to be corporates and sovereign wealth funds, although the latter were more likely to stick to small and medium-sized deals after taking flak last year when sizing up blue chips like UK supermarket group J. Sainsbury .

One of the biggest attempted cross-border deals in Europe last year was Qatari fund Delta Two's $22 billion proposed bid for Britain's third largest supermarket group J. Sainsbury.

That bid unraveled as the credit crunch hit, but speakers at the Reuters summit predicted sovereign wealth funds were likely to be return players in the retail sector.

"We expect some activity by sovereign wealth funds, but on a large scale these have created political controversy so think there will tend to be more small and medium-sized deals that are under the radar screen," Kalish said.

EMERGING MARKETS

Types of businesses catching the eye of predators are those which may be suffering due to the downturn but are structurally in a strong position -- such as the clothing or online electricals industries, OC&C's George said.

Emerging markets retailers in Russia and Eastern Europe may also prove more appetizing because the price tags are lower but the growth potential much bigger.

An example of that growth is X5 Retail Group , Russia's largest food retail group, which tripled its net profit to $86.3 million in the first quarter.

China was also an interesting possibility because it was an unsustainable, and therefore unstable, market where a dozen of the world's leading retailers, including Wal-Mart , Carrefour and Tesco , are in the market jostling for market share.

George predicted consolidation of the Chinese market was likely in the next 3 to 5 years with other potential targets for foreign retailers the newly privatized, formerly state-owned department store network.

For Rajan Bharti Mittal, managing director of India's Bharti Enterprises, which has a food retail joint venture with Wal-Mart, India presented another opportunity. He tipped food distribution centers to cold chain storage as possible targets of foreign investment.

Indeed, Mittal said he believed India was a greater opportunity than China where supermarket majors like Wal-Mart and Carrefour have taken 10 years in the market to turn revenues of around $1 billion.

In India, Mittal saw Bharti Retail making revenues of more than $1 billion well before a decade was out.