M&A - a buyers’ market now?
pace of expansion, acquisition is the answer.
by John Garratt
john.garratt@iteuropa.com In the software sector it is more of a classical story of companies buying
each other for skills, markets and general expansions, while in IT services it is
often a case of filing out a new offering or vertical market. Distribution, of
apart from all the news in IT Europa in the last few
course is in long term consolidation, but in general, the IT spend is holding up
months, two new reports are also highlighting the
fairly well. There is nervousness, certainly, but IT services seems robust – even
continuing market in approaches, bids, take-overs,
the new contracts that are coming through do not show a downturn.
mergers and acquisitions. What is happening out
there? We thought funds were tight and businesses
But Rowell warns this could change rapidly. If somehow “proof” of even a
in the channel were trying to scale back to keep costs mild recession appears in Europe, those holding the money might hold on for
down. The opposite may be true......
a while to see the outcome. The pricing is fair, he thinks. “We’ve not seen a
ramp-up in prices in the last few years, they’re not inflated, so there should be
&A in the global technology market forged ahead last year with no dramatic reduction, nor a massive dash to the exit by private equity.”
M
the value of transactions rising by 44% to €127bn (2006: €88bn). The public markets remain difficult, with limited liquidity in the mid-cap
2007 proved to be a vintage year for the technology sector, arena and downgrading in valuations prevalent across the sector. This is likely
driven by a surge in mid-market activity especially within the Software and to create selective buying opportunities for trade acquirers, and also those
IT Services (SITS) segments. The forces of convergence, private equity houses with the appetite and access to
together with the compelling financial rationale liquidity to pick the right public to private platforms.
associated with customer demands for comprehensive “In terms of deal drivers, confidence is always a factor
and integrated solution sets, continue to drive activity although in the technology sector I would say the
levels. appetite for acquisitions is still pretty strong (from
But with money for acquisitions tightening, is the both trade and private equity alike). It has been a good
2008 market in trouble after all the activity in 2007? Initial indications suggest time for shareholders seeking to sell, but the pendulum may well be swinging
this is unlikely. While activity in the mega deals market slowed markedly at the towards buyers,” says Andy Morgan, Technology Sector Leader, Corporate
end of 2007, underlying volumes remained robust, with the largest Q4 figures Finance, PricewaterhouseCoopers.
for completions in the last five years. “The reality is that quality assets in the sector will always attract attention,”
Peter Rowell, chairman of European Technology M&A watchers Regent tells he tells us. There has certainly been good activity in the Nordic region
us that sentiment remains strong: ”The deal flow in Q1 is consistent with the - witness the pending bid for Tietoenator and Fujitsu’s acquisition last year.
level of the last two years.” He is not seeing a drop in the level of enquiries. Other active markets have been in eastern Europe.”
Buyers are still there – private equity is loaded with cash, and while the large According to the recent study by Regent, there were 787 acquisitions
deals which require major financial resources might find it hard to find backers, involving European technology companies in Q1 2008, a decline of just 2%
the small and medium deals are still being done. from the 799 deals announced in the final quarter of 2007. However the
And there is every reason or the deals to continue – the buyers have cash, combined value of these acquisitions has fallen dramatically to $45b, almost
the organic growth has slowed to perhaps 5%-6%, so in order to maintain the half of the $86b recorded in the previous quarter. This indicates that whilst
12 02 MaY 2008
It0808 - 12-13_acquis.indd 12 2008-04-30 11:35
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