Mergers and acquisitions activity will rise in the next few years as retailers attempt to boost battered profit margins, according to a report from Andersen Corporate Finance's retail group.

In the past three years the European retail sector has experienced a significant downturn. However, said the report, this has not been a part of the normal economic cycle, with an upturn just around the corner. Instead, the retail sector is a mature market with inelastic demand, price deflation and significant overcapacity.