The value of mergers and acquisitions involving Irish companies grew 32 per cent in 2007, primarily driven by a very strong first half performance.

Private equity and other leveraged buyers accounted for 44 per cent of deal value in the year. These purchasers rely on high levels of bank debt to fund their acquisitions, but the dislocation in credit markets experienced since September 2007 is having a serious effect on transactions of this type.

Banks are reducing the level of debt that they are prepared to commit to buyouts by as much as 20 per cent. Consequently, this places higher equity demands on leveraged buyers and strengthens the position of trade buyers.

Accordingly, we expect to see a decline in deal volumes in 2008, as credit markets are unlikely to recover fully until well into the year.

A number of landmark deals drove volumes in 2007, with the top five transactions accounting for 59 per cent of deal values in the year.

The largest deal was the €5.7 billion acquisition of IFSC-headquartered Depfa Bank by Hypo Real Estate which received EU competition approval during the final quarter. Barry O'Callaghan's Riverdeep was responsible for the second largest transaction of the year, completing the €2.9 billion acquisition of Harcourt, the US schools division of Reed Elsevier in July.

Quinlan Private closed two large hotel purchases in the year which were the third and fourth largest deals in 2007. It acquired Marriott Hotels for €1.6 billion in February followed by Jurys Inns in June for €1.2 billion.

The final top five deal of 2007 was Alphyra's reverse takeover of Cardpoint plc. The €800 million merger created Payzone, a leading European consumer payments and cash distribution group and listed on AIM.

Construction group CRH was again active on the acquisitions front. The €2.2 billion it spent over the year represents another record for the firm that assiduously pursues bolt-on deals.

Other large deals that closed off the year include the €700 million acquisition of Rexam by Ardagh Glass, the Moran Group's €500 million acquisition of Bewleys Hotels and the €400 million acquisition of LogicaCMG Telecoms by Atlantic Bridge Ventures.

Joe Devine is a director of Ion Equity