Investment banks are owed more than $4bn (€3bn) in mergers and acquisitions fees as revenues are failing to keep pace with record deal activity.

The value of M&A deals announced in Europe hit $1.3 trillion last week, beating the previous record of $1.1 trillion set in 2000. If dealflow continues at current levels, it will top $1.5 trillion by the end of the year. However, fees earned by investment banks on transactions have not kept pace. Banks have been paid $6.7bn in fees this year, less than the $7.5bn earned last year, according to investment banking data provider Dealogic. Banks are owed a further $4.3bn in fees based on deals announced but not yet completed – 38% of the total fee pot. Banks can receive about 10% of fees when a deal is announced and the remainder on completion, while on some deals, the entire fee is based on the deal being successful. One banker said: "The high number of contested bids inflate the M&A market because only one bid can succeed for a company. The fee pot is much smaller than announced deal activity suggests." This year has been marked by a large number of cross-border deals, which carry a greater degree of completion risk because they are subject to political and regulatory scrutiny in more than one country.