MERGERS &
ACQUISITIONS
A buyers' market now?
Apart from all the news in
deals to continue – the buyers have while to see the outcome. The pricing is
cash, the organic growth has slowed fair, he thinks. “We’ve not seen a ramp-
the last few months, two new
to perhaps 5%-6%, so in order to up in prices in the last few years, they’re
reports are also highlighting
maintain the pace of expansion, not inflated, so there should be no
the continuing market in acquisition is the answer. dramatic reduction, nor a massive dash
approaches, bids, take-overs,
In the software sector it is more to the exit by private equity.”
mergers and acquisitions. What
of a classical story of companies The public markets remain difficult,
is happening out there? We
buying each other for skills, markets with limited liquidity in the mid-cap
and general expansions, while in IT arena and downgrading in valuations
thought funds were tight and
services it is often a case of filing out prevalent across the sector. This
businesses in the channel were
a new offering or vertical market. is likely to create selective buying
trying to scale back to keep Distribution, of course is in long opportunities for trade acquirers, and
costs down. The opposite may
term consolidation, but in general, also those private equity houses with
be true......
the IT spend is holding up fairly well. the appetite and access to liquidity
There is nervousness, certainly, but IT to pick the right public to private
services seems robust – even the new platforms. “In terms of deal drivers,
M
&A in the global technology contracts that are coming through do confidence is always a factor although
market forged ahead last year not show a downturn. in the technology sector I would say
with the value of transactions But Rowell warns this could change the appetite for acquisitions is still
rising by 44% to €127bn (2006: rapidly. If somehow “proof” of even a pretty strong (from both trade and
€88bn). 2007 proved to be a vintage mild recession appears in Europe, those private equity alike). It has been a
year for the technology sector, driven holding the money might hold on for a good time for shareholders seeking
by a surge in mid-market activity
especially within the Software and
IT Services (SITS) segments. The
forces of convergence, together with
the compelling financial rationale
associated with customer demands for
comprehensive and integrated solution
sets, continue to drive activity levels.
But with money for acquisitions
tightening, is the 2008 market in trouble
after all the activity in 2007? Initial
indications suggest this is unlikely. While
activity in the mega deals market slowed
markedly at the end of 2007, underlying
volumes remained robust, with the
largest Q4 figures for completions in the
last five years.
Peter Rowell, chairman of European
Technology M&A watchers Regent tells
us that sentiment remains strong: ”The
deal flow in Q1 is consistent with the
level of the last two years.” He is not
seeing a drop in the level of enquiries.
Buyers are still there – private equity is
loaded with cash, and while the large
deals which require major financial
resources might find it hard to find
backers, the small and medium deals
are still being done.
And there is every reason or the
12 8020 EUROPA JUNE 2008
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