LONDON: The global credit crunch, which reared its ugly head in the second half of last year - and which continues to threaten national economies - is likely to affect European media mergers and acquisitions throughout 2008.

A new report from PricewaterhouseCoopers predicts the squeeze on financing will push down M&A activity by around 20%.

PwC expects deal values to fall to around €40 billion ($58bn; €29.6bn) from €50bn in 2007. Transaction levels are likely to be steady at 175 transactions, but acquisition targets are expected to be smaller because of credit restrictions.

The report shows M&A activity in the UK was boosted last year by the €13.5 billion ($19.7bn; £10.02bn) Reuters/Thomson merger.

But most of the deal value in Britain came from transactions in the first half of the year, says PwC's media sector leader Olivier Wolf.

He adds: "This could indicate a cautious time ahead for companies as the economy is watched closely."

Data sourced from Media Week (UK) and; additional content by WARC staff