UK law firms made an estimated £1.2bn from the private equity sector last year, according to new figures released by the British Private Equity and Venture Capital Association (BVCA).
A number of high-profile takeovers were completed in 2007, including the Kohlberg Kravis Roberts-backed management buyout of Alliance Boots - the first time a FTSE100 company had fallen prey to private equity.
Travers Smith head of private equity Charles Barter said: "It was our record year - more deals and bigger total value than ever before."
Law firms were among the top three fee-earners within private equity, taking home £1.2bn out of a total of £5.4bn generated across the financial services sector. But with a tougher economic climate in 2008, City firms are bracing themselves for a slowdown.
Barter said: "I still think we're going to be busy in the short term - for the next two or three months. After that it's difficult to say."
Macfarlanes corporate partner Ian Martin said the credit crunch was starting to have an impact on larger private equity deals, but that he nevertheless remains confident.
"Confidence has gone out of the market," he said. "There's plenty of money in the private equity funds, but less leverage available.
"Last time we had a downturn in private equity was at the turn of the century. We were lucky with the clients we looked after - we were quite busy. Those clients are still around."