After mergers & acquisitions (M&A) activity in 2012 was driven by enormous £1 billion-plus deals, fund managers think this year could see cash-rich companies from overseas start to snap up smaller rivals.

Ed Beal, fund manager at Aberdeen Asset Management said: "We think M&A will return. We are in a period of lower growth.

"It is therefore easier for chief executives to buy growth rather than generate that growth themselves."

He told a seminar organised by the Association of Investment Companies in London that such deals require boardroom confidence, which he said has been steadily rising such the eurozone crisis was seen to stabilise last summer.

Mr Beal, who oversees the £94 million Dunedin Smaller Companies Investment Trust from Aberdeen's Edinburgh office, said: "Valuations are still weak. They won't reach too much shareholder resistance."

Mike Prentis, manager of the Throgmorton Trust, said: "I think we will see more M&A activity. It is starting to happen. I am sure there are lots of people out there trying to put deals together if only to get a fee."

He added: "Chief executives are running companies with quite a lot of cash. They really want to do something."

He said that overseas companies could lead the pack.

Detailed data from information services provider Experian shows that value of merger and acquisitions transactions across the UK rose 4.8% to £242 billion last year, including a 10% rise in Scotland.

However, this was driven by very large £1 billion-plus deals, such as Johnnie Walker whisky owner Diageo's acquisition of India's United Spirits.

Meanwhile, smaller deals worth up to £10m were flat year-on-year and mid-size deals of £10m to £100m fell.