Companies talk takeovers, but will they get done?

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By Monday pub company Punch Taverns confirmed plans for an all-share takeover of rival Mitchells and Butlers.

As investment bankers boast of "full pipelines" for mergers and acquisitions observers might be excused for thinking the credit crunch has had no impact on business volumes because companies are stepping in to pick up the slack left by private equity firms frozen out by the credit squeeze.

But look harder and keep in mind that talk is relatively cheap.

Private equity firms are having trouble borrowing to make takeover bids in the current markets, forcing down asset prices.

Volatile markets and economic jitters mean that when push comes to shove, executives are getting cold feet about deals.

"There is a question mark over how many of these M&A talks will actually lead to transactions," one investment banker said.

"Some companies are deciding that if they wait six months things will be even cheaper and others that it's too uncertain to make long-term decisions so it's best to postpone."

And even where corporate executives are happy to push the button and bid for a rival, many current offers, which in the past may have been made in cash, are using shares.

This, especially in a falling stock market, makes them harder for the seller - or its investors - to accept. As buyers try to use shares and avoid having to raise cash in the current credit crunch, so sellers prefer to be handed the cash.

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