MERGERS &
ACQUISITIONS
to sell, but the pendulum may transactions – those valued at more slow down is already impacting on
well be swinging towards buyers,” than $100m. “Our prediction is that Software Developers market, in an
says Andy Morgan, Technology for the remainder of 2008 deal flow analysis published on 1st May. The
Sector Leader, Corporate Finance, will continue at healthy levels, perhaps findings offer stark reading: a third
PricewaterhouseCoopers. with some tailing off as it progresses.” of companies are already showing
“The reality is that quality assets Active acquirers are finding rich signs of recessionary behaviour,
in the sector will always attract pickings amongst private companies, reporting declining sales. Over half
attention,” he tells us. There has many of whom, even if they were of companies have seen their margins
certainly been good activity in the capable of undertaking an IPO, are fall. Of most concern, over a quarter
Nordic region - witness the pending finding acquisition valuations highly of these are currently running at a loss,
bid for Tietoenator and Fujitsu’s attractive. The supply of suitable and struggling against rising costs and
acquisition last year. Other active private company targets limits the declining sales.
markets have been in eastern Europe.” attractiveness of purchasing listed Over half have seen an increase in
According to the recent study by organisations even though public their need for short term finance, a sign
Regent, there were 787 acquisitions company valuations appear to be that costs are running ahead of cash
involving European technology relatively low at present, says the flow. This is doubly dangerous at a time
companies in Q1 2008, a decline Regent study. when banks and financiers are looking
of just 2% from the 799 deals In specific sectors such as hard at their loan books and therefore
announced in the final quarter of 2007. software, David Pattison, senior places these companies in an even
However the combined value of these analyst at Plimsoll, reports: “We are more vulnerable position. As a result,
acquisitions has fallen dramatically reading every day how the credit as many as one in five developers
to $45b, almost half of the $86b market and the world of finance companies could disappear if this trend
recorded in the previous quarter. This is being hit, but nonetheless I was continues or deepens, it warns.
indicates that whilst recessionary fears still surprised to see just how much “The recent climate is poor for
and the shortage of suitable credit the Software Developers Market software companies as clients look
has had little effect on the smaller is feeling the pressure.” Plimsoll to tighten their belts and hold back
deals, it is clearly impacting larger Publishing has looked at how the UK capital expenditure. This will intensify
acquisition possibilities as software
companies seek efficiencies and look
to streamline their portfolios. For now,
smaller companies look less exposed
as they are insulated against global
markets. It is at the larger end where
I would expect some activity,” says
David Pattison.
Twenty-four of the UK’s largest 100
Software developing companies are
already running at a loss, in France
23 of the top 100, he says. The
impact is being felt across these two
countries, costs will need to be cut
and acquisitions are the route for many
to deliver this.
The software developer analysis
is not entirely without good news.
There is some evidence that certain
areas, particularly the small companies
with their concentration on local and
domestic markets, are less exposed
to the slow down in the market.
But among distributors, everyone,
including the companies themselves, is
saying that this year will see a massive
wave of consolidation, at all levels and
in most countries.
www.regent.com
www.pricewaterhousecoopers.com
JUNE 2008 8020 EUROPA 13
12,13,14.indd 2 13/6/08 09:46:32
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