* LiveMarkets: cpurl://apps.cp./cms/?pageId=livemarkets
* European stocks edge up, Italy outperforms
* M&A chugs along, Lloyds snaps up MBNA from BofA
* Mediaset +17% as Vivendi ups stake
* Deutsche Boerse, LSE in talks with Euronext on LCH.Clearnet
LONDON, Dec 20 (Reuters) - European shares rose slightly on Tuesday, holding near their highest levels since January, helped by a busy year-end for corporate deal making and more signs that Italy is making progress on stabilizing its wobbly banking sector.
Europe's STOXX 600 rose 0.2 percent with healthcare and financials providing the biggest boost to the index. Among regional benchmarks, Italy's was the best performer, up 0.4 percent.
But geopolitical risks for markets were underscored by investigations into killings in Berlin and Zurich overnight as well as the assassination of Russia's ambassador in Turkey. Those incidents had little impact across European equity markets.
A recovery in corporate mergers and acquisitions activity helped underpin the ongoing year-end rally, with Mediaset surging another 18 percent on Vivendi plans to up its stake in the Italian broadcaster to 30 percent. Mediaset shares, now up on the year, have nearly doubled since late November.
Corporate deal making, which had a record year in 2015, suffered earlier this year from uncertainty surrounding the UK's vote to exit the European Union, the U.S. presidential elections and Italy's efforts to stabilise its banking system.
"It could be that a lot of firms worried about Brexit and Trump earlier this year have realized that nothing has really changed yet, markets are up and want to get deals done," said Artur Baluszynski, head of research at investment firm Henderson Rowe.
Elsewhere, Lloyds Banking Group said it would buy MBNA from Bank of America for $2.4 billion, a move that would make the British lender the second-biggest credit card provider in the country.
Lloyds shares rose 2.2 percent and were the top gainers on the FTSE 100.
Euronext shares rose more than 3 percent after Deutsche Boerse and London Stock Exchange said they were in talks to offload LCH.Clearnet to the pan-European exchange operator ahead of their planned merger.
Italy's banking stocks rose more than 1 percent after the government decided to seek parliamentary approval to borrow 20 billion euros to underwrite the stability of its banks, starting with a likely bail-out of No. 3 lender, Monte dei Paschi di Siena, as early as this week.
The materials sector, particularly metals mining shares, was the biggest drag on the broader markets and some investors locked in profits following the stellar run this quarter and as concerns about China resurface. (Reporting by Vikram Subhedar; Editing by Catherine Evans)