Merger and acquisitions (m&a) activity in Europe's media sector boomed during 2000, but is set to halve in the current year, being replaced by traditional alliances and joint-ventures.

A new report from the corporate finance arm of accounting giant Andersen says that consolidation between firms and convergence of old and new media are the main drivers of m&a activity in entertainment. But companies are now seeking less risky routes for growth than takeovers. "Companies [are] increasingly falling back on alliances and joint-ventures in place of M&A transactions to protect themselves against the current uncertainty in the market", says Chris Tidball, head of the media team at Andersen Corporate Finance.

The European boom of last year - which saw 383 completed deals with a combined value of Euros85.2bn, was particularly influenced by the activity of German Neuer Markt-registered companies, which were involved in 40% of all deals. With these firms now largely stripped of their war chests and the evaporation of booming share prices, m&a is expected to fall this year.

Europe's underlying entertainment market grew 4% to Euros48.2bn in 2000, with film the fastest growing at 14%, to Euros10.6bn. This was driven by the growth of DVD. Music declined by 10% hit by pirate CDs and on-line downloads.

Although the number of US m&a transactions dropped, their value doubled to Euros207bn and the underlying business grew faster than that in Europe, by 7.8% to Euros 94.2bn.

The total values of the deals in both Europe and the US were hugely inflated by two mega-mergers: AOL-Time Warner and Vivendi-Universal.

There were 144 m&a deals involving film companies last year, accounting for 38% of all entertainment deals in Europe. These were worth a total of Euros9.5bn.