A note of caution entered the European M&A market in the third quarter. After two quarters of frenetic activity, there was a slowdown that was more than merely seasonal. Europe saw a 36% drop in the total value of deals. If this trend continues into the final quarter, as seems likely, competition among the already consolidating investment banks will be heightened still further.

Bankers point to two principal factors reining in the market: falling stock market valuations and the unpredictability of the regulators. This is particularly affecting the top end of the banking market since the bulge-bracket players have invested huge resources in the technology and telecoms sectors where much of the uncertainty has been felt.