Worldwide merger and acquisition activity for 2006 rose to a record $3.1trillion last week, with more heavyweight deals such as the potential buyout of Qantas promising to take the figure even higher.

Private equity firms have so far been responsible for $616bn in acquisitions, up from $222bn last year, according to figures from Bloomberg.

Ireland hasn't been immune.

Eircom was bought by Babcock & Brown this year in a deal that valued the former state company at 2.4bn.

Ryanair has had its failed 1.1bn tilt at Aer Lingus, The Irish Times acquired Myhome. ie for 50m and Largo Foods snapped up Tayto from C&C for over 62m.

The one thing that these deals don't have in common with many that have gone before? Property plays. Last week, food company Greencore, in which developer Liam Carroll owns a 22% stake, said it wants to spend 1.1bn to construct a major residential and retail complex in Carlow on the site of its former sugar factory.

While Greencore obviously isn't an M&A deal, it's the sort of thing that reiterates, if it needed reiterating, the ongoing Irish fascination with property. Fruit company Fyffes also recently spun off its property portfolio, while South Wharf, spun out from glass manufacturer Ardagh, has just been sold to a consortium headed by developer Bernard McNamara. South Wharf 's sole asset is the former Irish Glass manufacturing site at Ringsend in Dublin.

Statoil also sold its retail sites to the Topaz consortium that includes Denis O'Brien and is backed by Ion Equity earlier this year for almost 300m. But while property's evident lure has been playing its part in Irish corporate activity, don't expect the party to last forever.

"I think you're at the top of the market here, " warned James Lillis, a director with corporate finance house CFM Capital, an associate company of Mazars. He said that even with interest rates at historically low levels, the upward trend is causing investors to think again about stuffing their money into Irish property. The International Monetary Fund has recently advised the European Central Bank to keep raising interest rates in the euro zone, saying that the "cautious withdrawal of monetary stimulus is warranted".

"Interest rates rates are rising and that does make it more difficult to get the kind of returns that have been there, " Lillis added. He "doubts" that property will continue to form the backbone of M&A deals in Ireland. "Lenders and buyers are looking with great caution at the moment at the type of returns they're going to get."

Lillis also points out that there's increased interest from Irish investors in foreign markets, and that more are looking to the UK and further afield.

Other corporate financiers believe opportunities remain to be exploited in Ireland.

Eithne Fitzgerald, head of corporate finance at A&L Goodbody, agreed that property plays a "significant" role in some Irish deals, but added that it is not generally the principal driving factor in what she described as a "buoyant" Irish M&A market. "It's certainly a much stronger feature in Ireland at the moment than it is in other jurisdictions."

Fitzgerald said that many traditional businesses . . . IAWS and Readymix are just two such examples . . . are sitting on extremely valuable sites that haven't been exploited.

"I think there's still phenomenal interest in development of commercial property, particularly in inner city sites that may have been surplus to requirements, " she said.

But, as Lillis pointed out, investors are cautious about the returns they might get. And watchdogs such as the UK's Financial Services Authority are also concerned that some private equity deals may be too highly leveraged.

The FSA said that the default of a large private equity-backed company or a cluster of smaller private equity companies "seems inevitable" and said that some loans extended by banks to fund leveraged buyouts may not have been "entirely prudent".

Last week, it emerged that a £450m syndicated loan being sold by Royal Bank of Scotland and Credit Suisse to partfund the £750m takeover of Dermot Desmond's London City Airport by AIG and General Electric is not proving an attractive proposition to potential debt partners.

Eithne Fitzgerald maintains that equity houses are exercising due caution.

"There has been an ever increasing trend towards high gearing, but private equity houses are in business to make money and I think it's unlikely that they would be doing deals where they didn't feel they had a viable model and a doable exit strategy, " she said.

Liam Igoe, an analyst with Goodbody Stockbrokers who covers food equities, said that most Irish companies, being cognisant of rocketing property prices, are aware that it's in their interest to unlock any spare land capacity, pointing to how both Bank of Ireland and AIB have engaged in lucrative sale and leaseback deals.

"Companies are trying to unlock value in a number of ways, " he said. "Initially, it was about selling off property, but then they probably became aware that that may not have captured enough of the value so some have maybe tried to get planning permission before considering what to do with it."

Figures for the latest quarter's M&A activity in Ireland, compiled by Ion Equity, show that land may not always be as important as it seems in Irish deals. Some big transactions during that period had no property exposure. Some of the biggest deals of the second quarter were pure plays . . .

such as the 110m acquisition of Kerry-based Stockbyte by Getty Images, and Doughty Hanson's 266m purchase of TV3. Babcock & Brown's takeover of Eircom also featured in that period.

David Lyons, an associate director with IBI Corporate Finance, said that some recent deals have had significant property elements to them, but that investors are fundamentally interested in strong performing businesses with solid management teams.

"A good business is what investors are looking for. If there is a property angle then that makes it all the more attractive, " he said. "It's obvious that deals with a strong property underpin affect valuations and you clearly see that in some transactions where it's difficult to see, based simply on earnings multiples, how a business could have been valued at levels it may have seen."

There are still many potential property plays left in the Irish market, but just how long the current interest lasts will be reliant on the continuing upward push of bricks and mortar prices. And how long that will last is anybody's guess.

GEARING UP FOR A DOTCOM-STYLE BUST

IS this the next dotcom? Or a repeat of the 1980s? Some think so. Private equity "rms have been ploughing money into global deals in the past 11 months, but some regulators are getting edgy. The UK's Financial Services Authority has already sounded warnings that some deals may be too highly leveraged and that banks should exercise more prudence over how deals are being, in some cases, very highly geared. The FSA has gone as far to suggest that some private equity "rms may go bust.

Buyout "rms use their own funds and debt secured on the companies they acquire to pay for takeovers. They typically seek to expand companies or improve their performance before selling them within "ve years to other investors.

Leverage, the L in LBO, reached a 10-year high in Europe in April, when buyout "rms borrowed the equivalent of six times the annual cash generated by the companies they acquired, according to Standard & Poor's. A group of 13 UK banks had a combined exposure to private equity of 67.9bn as of June 2006, a 17% increase on the year-earlier period, according to the FSA.

Hedge funds are increasingly lending money to fund buyouts, replacing banks and prompting concern they would be less willing to keep lending if business sours.

"Most of the debt in the large deals is sold to anonymous holders, and so there's a question mark as to who owns the risk, " said Tom Lamb, co-head of Barclays' buyout unit in London. "It could be harder for a company to manage its way out of insolvency."

The cycle of money lending is leading some to draw comparisons with the dotcom boomcollapse period, where venture capital was thrown at companies that had no viable business plan. There are some concerns that private equity deals may become so highly geared that it becomes dif"cult to successfully fund them before they are sold years later.

Comparisons are also being drawn with the 1980s, which typi"ed boom-bust cycles.

Chief executive of Australia's Westpac bank, David Morgan, said this month that in"ated asset values, highly geared takeovers and rising interests rates parallelled the boom and bust conditions of the 1980s.