FEaTURE
Numbers of acquisitions by country Source: Regent
recessionary fears and the shortage of suitable credit has had little effect on running at a loss, and struggling against rising costs and declining sales.
the smaller deals, it is clearly impacting larger transactions – those valued at Over half have seen an increase in their need for short term finance, a sign
more than $100m. “Our prediction is that for the remainder of 2008 deal flow that costs are running ahead of cash flow. This is doubly dangerous at a time
will continue at healthy levels, perhaps with some tailing off as it progresses.” when banks and financiers are looking hard at their loan books and therefore
Active acquirers are finding rich pickings amongst private companies, places these companies in an even more vulnerable position. As a result,
many of whom, even if they were capable of undertaking an IPO, are finding as many as one in five developers companies could disappear if this trend
acquisition valuations highly attractive. The supply of suitable private company continues or deepens, it warns.
“The recent climate is poor for software companies as clients look to
tighten their belts and hold back capital expenditure. This will intensify
“The reality is that quality assets will always attract
attention.”
acquisition possibilities as software companies seek efficiencies and look to
Andy Morgan,
streamline their portfolios. For now, smaller companies look less exposed as
PricewaterhouseCoopers they are insulated against global markets. It is at the larger end where I would
expect some activity,” says David Pattison.
targets limits the attractiveness of purchasing listed organisations even though Twenty-four of the UK’s largest 100 Software developing companies are
public company valuations appear to be relatively low at present, says the already running at a loss, in France 23 of the top 100, he says. The impact
Regent study. is being felt across these two countries, costs will need to be cut and
In specific sectors such as software, David Pattison, senior analyst at acquisitions are the route for many to deliver this.
Plimsoll, reports: “We are reading every day how the credit market and the www.regent.com www.pricewaterhousecoopers.com
world of finance is being hit, but nonetheless I was still surprised to see OUR aNaLySIS
just how much the Software Developers Market is feeling the pressure.” The software developer analysis is not entirely without good news. There
Plimsoll Publishing has looked at how the UK slow down is already impacting is some evidence that certain areas, particularly the small companies with
on Software Developers market, in an analysis published on 1st May. The their concentration on local and domestic markets, are less exposed to the
findings offer stark reading: a third of companies are already showing signs of slow down in the market. But among distributors, everyone, including the
recessionary behaviour, reporting declining sales. Over half of companies have companies themselves, is saying that this year will see a massive wave of
seen their margins fall. Of most concern, over a quarter of these are currently consolidation, at all levels and in most countries.
02 May 2008 13
It0808 - 12-13_acquis.indd 13 2008-04-30 12:55
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