The �11.1bn takeover of Alliance Boots in April was the last major takeover to make it through the door in Europe before the summer credit crunch effectively closed the debt markets. According to Candover's third-quarter review, the volume of the largest transactions . . . those worth 1bn (�700m) or more . . . decreased from 29.8bn in the second quarter of the year to just 9bn in the third quarter.

The trickle of new transactions has been accompanied by a rising number of deals that were struck at a time of easy money and are now being undone. This year, 46 private equity buyouts in America and Europe worth $132bn ( 92bn) have been pulled, more than twice the $58bn worth of deals yanked during all of last year, according to Dealogic.

The most high-profile case is that of Sallie Mae. JC Flowers agreed to buy the US group that specialises in lending to students in April for $25bn.

Yet as market conditions deteriorated and a new law cutting subsidies to the sector was introduced, Flowers pulled out of the deal. Sallie Mae sued for breach of contract and the companies are embroiled in what is likely to be a long court battle.

Banks have also begun to renege on finance terms.

Blackstone is stuck in a squabble with Lehman Brothers and JP Morgan, the banks that agreed in March to fund its $1.8bn takeover of PHH. The Wall Street giants have since cut the amount of debt they are willing to provide by $750m.

The high-water mark that saw the size of funds explode in recent years is also likely to have now passed. Blackstone closed the world's largest-ever fund earlier this year at $21.7bn. Yet with three-quarters of that cash pile already invested, the New York giant is set to launch a new fundraising drive next month. Sources expect the new fund will be significantly smaller.

Candover said the UK is still the biggest buyout market in Europe, though its share of deals dropped from 62% to just 40% . Deals worth 750m or less were the only part of the industry that registered growth.

"These latest figures show a near 30% decline in the headline value of buyouts as the credit crunch began to hit the big deals, " said Candover's Marek Gumienny. "There are still deals to be done but the dynamics of deal making have changed.

Focusing on the fundamentals . . . can businesses repay their debt in three, five, seven years? . . . is back in fashion."