European M&A activity levels have held up across the magic circle despite the downturn in the credit markets.

Statistics compiled for Legal Week by Mergermarket show that volume levels fell by a third across magic circle advisers in the first calendar quarter of 2008, compared with Q1 2007.

Despite the significant drop, the firms put in a better performance than many would have expected given the slowdown in overall deal activity.

The figures show that Freshfields Bruckhaus Deringer advised on 45 deals in the first three months of this year, compared with 64 and 63 for the same period in 2007 and 2006 respectively.

Figures for the rest of the magic circle show similar drops in activity, with Allen & Overy acting on 37 deals in Q1 2008, compared with 59 in Q1 2007.

Volume also fell markedly between Q4 2006 and Q4 2007, with both Clifford Chance and Slaughter and May seeing deal activity fall by nearly 50% between the two periods. In contrast, Freshfields saw its European M&A activity levels increase over the period.

Barry O'Brien (pictured), head of Freshfields' corporate finance practice, told Legal Week: "Clearly the days of the mega-deals and highly leveraged acquisitions are behind us but private equity houses are working their capital in different ways and arguably the fact that they have capital to invest has put them in a stronger position.

"It is going to be a difficult market for the rest of the calendar year and we will not fall that dramatically."

Stephen Cooke, head of M&A at Slaughters, added: "We are still amazingly busy at the moment, which is something that I never would have predicted. There is plenty of work still out there although I do think that we have not felt the full impact of the credit crunch yet."