Europe's biggest companies are preparing to do more mergers and acquisitions without using investment banking advisers, a survey for Financial News has revealed.

A poll of 427 European companies, banking and legal advisers and private equity firms revealed that 77% of companies said they were making more use than before of their internal M&A teams on deals. The research – conducted on behalf of Financial News by Intralinks, an electronics services provider – comes as big companies hire experienced dealmakers to run their M&A teams. UK bank Barclays, US carmaker Ford, UK mobile phone company Vodafone and UK insurer Aviva have recently recruited top names in investment banking. In July, Ford hired Ken Leet, former head of investment banking at Bank of America, as an adviser and has since put up Aston Martin, one of its luxury car units, for sale. Last week, Barclays Bank recruited Marcus Agius, former chairman of Lazard in London and one of the City of London's best-known M&A bankers, as its chairman. European M&A deals worth $168bn (€131bn) have been carried out without advisers to either the buyer or seller this year. The position of advisers is not under threat on big deals, where they are needed to lend money. But, while banks are experiencing a bumper year in M&A advisory following a sharp upturn in deal activity, advisers are having to fight harder to justify fees for pure M&A advice, as chief executives perceive greater conflicts of interest at big investment banks. The appointment by corporates of seasoned dealmakers also makes life more difficult for advisers to charge high fees without justification. The size of private deals being done by internal M&A departments is on the rise. Banks that specialise in smaller deals are being particularly hard hit. An investment banker said: "ITV, the UK broadcaster, chooses to appoint external advisers to sell tiny companies. On the other hand, Reed Elsevier, the publishing group, will do a $700m acquisition without appointing anyone." While companies are shunning their advisers, there are signs they are accepting hedge funds into the fold. Almost 42% of corporate respondents said hedge funds had a positive impact on European M&A while only 25% said their effect was negative. A prime broker, who finances hedge funds' trading, said: "It is clear that companies' willingness to meet hedge funds has improved beyond all recognition in the past three years." Companies prefer to meet firms such as the UK's Lansdowne and Sloane Robinson, which have reputations as long-term investors, holding positions for up to five years. But they recognise that even short-term arbitrageurs can benefit their share price performance by reducing volatility. And although companies remain wary of short-selling, where a hedge fund sells share certificates it has borrowed in the hope of buying them back at a lower price, there is growing acceptance of the technique as a way of providing market discipline. Philip Scott, a director of Aviva International, said: "Some hedge funds have a deep analytical capability, which means they have a strong understanding of the companies they follow. Also, hedge funds are significant participants in the equity markets and their investments in companies are important. The ability of hedge funds to take positive or negative views on assets adds to market efficiency and is particularly important in times of high volatility." Paul Schulman, executive managing director of US corporate governance firm Altman Group, said: "Five years ago, most US companies were not aware of having any hedge funds on their shareholders register as their holdings were small. Now it is common to hear that 20% of the shares of a mid-cap US company are owned by hedge funds." One of his colleagues said it was only a matter of time before the same was true of Europe. European companies are preparing themselves, he said.