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As we approach the end of a year marked by record M&A volumes, McKinsey have weighed in to ask whether shareholders are once again losing out in the deal-making frenzy?

The answer, they say, is no - or at least, not as much. While earlier research from the consultants showed that 60 per cent of deals destroyed value for shareholders of the acquiring company, a review of almost 1,000 deals of over $500m from 1997 to 2006 suggest that deals in this cycle are on average creating more value.

McKinsey look at two measures to assess deals. The first looks at the total change in value across both companies at the time a deal is announced, as a percentage of the deal value. The second tracks how many buyers are thought by the market to have given up value to sellers by overpaying.

The findings are that over the 10 year period value created by an M&A deal averages 3.4 per cent of the deal value. But in the latest boom, from 2003 to 2006, that average is 6.1 per cent - compared with only 1.6 per cent between 1997 and 2000.

The overpayment measure suggests that acquiring companies may be keeping more of that value for themselves - with 57 per cent of companies thought to have overpaid in this cycle compared to 65 per cent in the last.

In fact, the index representing value created by deals now stands at a 10 year high, while the proportion of companies overpaying is at a low for the period - helped by both a higher proportion of cash deals and more modest premiums paid this time round .

In 1997, deal volumes were already on the up, rising to a twin peak in 1999 and 2000, with value created steadily falling and overpayment rising over the four years.

But in 2003, volumes had barely ticked up from bottom the year before - the M&A market was arguably still in recovery mode from its last come-down. And we may yet have further to run, with predictions that 2007 will match, or exceed, this year’s deal-making total.

The signs are good - with measures of overpayment and value creation both improving year-on-year from 2003.

But that still sees more than half of all acquirers overpaying on McKinsey’s measure.

Plus a favourable initial market reaction is one thing but delivering on the longer-term promise of a combination of two businesses is a far harder task. It may be too early to call the success or failure of companies’ deal-making in 2006.