As investment bankers boast of full pipelines for mergers and acquisitions, observers might think the credit crunch had not affected volumes, with companies taking up the slack left by debt-starved private equity firms.

Last week, as speculation mounted about a bid for France's Societe Generale, a Chinese fund and an industry interloper gatecrashed BHP Billiton's BHP.L $147 billion takeover offer for Rio Tinto. Later the same day, Microsoft bid $45 billion for Yahoo.

By Monday, UK pub company Punch Taverns confirmed plans for an all-share bid for rival Mitchells and Butler.

But while talk is axiomatically cheap, the price of debt and risk are proving prohibitively high.

Our M&A pipeline is very healthy-looking, but uncertainty in the market makes it harder to pull the trigger and complete deals, said Larry Slaughter, JP Morgan's co-head of M&A for Europe the Middle-East and Africa.

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

But volatile markets and economic fears are giving company executives cold feet.

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, one investment banker said.

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.

Deals that require new debt financing are going to be hard to handle, a senior investment banker said. All-share deals are easier.

But in a falling stock market, that is a much less alluring currency for the seller and its investors than hard cash.

And as banks, some with already stretched balance sheets, feel the pain of economic slowdown, they will find it harder still to lend cash.

Some, including Citigroup, JP Morgan and UBS, have begun shedding jobs in recent months.

An example of the hurdles that even corporations are facing in raising debt involves Merrill Lynch & Co.

Brazilian mining giant Vale VALES.SA dropped Merrill as one of two lead advisers on a potential $90 billion bid for Xstrata because the bank decided the financing package demanded by Vale was not economically feasible, sources familiar with the matter have said.

One of the sources said banks would rather walk away than take on deals with financing terms they consider too risky.

Unless clients adjust their expectations, this is going to become an issue for banks, he said.

The bank's president Greg Fleming said earlier this week Merrill was not prepared to use its balance sheet simply to boost its position in the mergers and acquisitions advisory league tables.

Banks are already in the frontline for a slowdown that has yet to filter through to other sectors.

Banking is a leading indicator. We've started to feel the pain and are laying people off. The corporate client is going to realize their business is slowing just when these deals would be due to get under way, the same senior banker said.

It's like a dinosaur; something's eating its tail, but the message hasn't got to the brain yet, he added.

Corporate clients are still failing to understand the market situation right now. Dealing with private equity clients is easier. They understand, said another banker.

Ironically, one industry that may still see deals is the financial sector, where banks unscathed by the subprime crisis have an opportunity to swallow up their distressed rivals.

BNP has said it is mulling a bid for Societe Generale, and Germany's Deutsche Bank said on Thursday it was on the prowl for acquisitions.

In financial services, it's all about the strong buying the weak, said another senior banker.

But elsewhere, there seem to be few deals coming together.

So while bankers, executives and commentators are still busy talking about M&A, in the end all they may have to remember from this period will be their conversations.