A huge surge of private equity buyouts has helped to push UK M&A volumes up almost 70 per cent so far this year but there are concerns that the merger boom could start to slow down.

The volume of UK takeovers has soared in the first six months to $256.5 billion (£128 billion), up 68 per cent from a year ago, making it the second busiest such period on record, according to data provider Dealogic. The £11 billion acquisition of Alliance Boots by KKR helped to fuel the frenzy and ranked as the largest UK deal this year and Europe’s biggest leveraged buyout to date.

In total, buyout firms accounted for 27 per cent of all UK M&A, or about $68 billion, a rise of 207 per cent from the year-ago period as the cash-rich financiers stepped up their three-year spending spree.

The UK boom helped to lift overall European M&A volumes to $1,200 billion for the first half, beating the $997 billion notched up in America. In Europe, the €72 billion bid battle for Dutch bank ABN ranked as the year’s biggest announced deal. But while bankers anecdotally point to pipelines full of deals, many are secretly expressing concerns that recent jitters in the US credit markets will spread to Europe. Earlier this week, KKR and Clayton, Dubilier & Rice were forced to pull a key £1.55 billion debt offering to finance their acquisition of US FoodService from Ahold as the sub-prime mortgage crisis made investors nervous of backing risky deals such as buyouts.

The Alliance Boots deal will be the big test case in Europe as the leading debt banks, including JPMorgan, Bank of America and Deutsche Bank, begin to syndicate out the £9.4 billion of loans in the market.

Dag Skattum, JPMorgan’s co-head of global M&A, said: “Clearly the fact that a couple of leveraged finance deals ran into some headwind is a caution sign. However, most of the drivers that contributed to the strong M&A markets up to now are still in place, including corporate confidence, capital availability and favorable financing terms.”

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