Credit market worries will continue to weigh on the U.S. mergers and acquisitions market through the first half of 2008, especially when it comes to large buyouts, according to new research from Piper Jaffray.

The Minneapolis-based investment bank says it believes U.S. M&A activity in 2008 will cool from the previous year, however it also predicts that deal activity will remain well above the recessionary levels seen in 2002 due to the strength of the global economy.

The report indicates that large deal activity will likely be the hardest hit, as these “mega-buyouts” will have difficulty securing financing in the first half of the year. However, it notes that the middle market has remained active as the total deal volume is only off 4% through the first nine months of 2007 compared to the same period in 2006.

In addition, the firm forecasts that foreign buyers will play an increasing role in M&A as both sovereign wealth funds and large foreign companies seek to take advantage of the weak US dollar to expand their global capabilities.

“Many companies and private equity firms have adopted a wait-and-see approach due to the volatility in the market,” says Jeff Rosenkranz, managing director and head of M&A at Piper Jaffray. “As the market becomes more comfortable with the current economic environment and credit issues, we expect a slight rebound in M&A activity through the second half of 2008.”