| Analysis & opinions on global M&A activity
The battle for top line growth and new customers drove the global value of technology mergers and acquisitions (M&A) up by almost 90% in 2005, with the top three deals accounting for over €25bn alone. Despite an increase in deal numbers of just 2% to 589, 14 €1bn-plus technology deals helped lift overall deal value by 88% to hit €97bn in 2005.
The report predicts that the confidence-boosting revival of mega-deals in 2005 will encourage strategic M&A among technology companies, as digital convergence becomes a real issue for business and consumers in the coming years.
Key findings of the report include:
UK technology plc goes shopping
2005 was the year the UK bucked historic trends to become a net investor in technology companies. UK companies acquired 33 technology businesses worldwide (up from 25 in 2004), while only 24 UK companies were acquired by overseas buyers (32 in 2004). More generally, however, the picture was one of increasing domestic deal activity. Domestic deal volumes were up 58% in the UK, 48% for countries in Europe and 52% for those in Asia.
Private equity consolidates its position
Private equity played an important part in the market in 2005, with private equity houses behind seven of the 14 €1bn-plus deals and fund exits driving a third of all technology flotations in the UK. A combination of maturing business models, proven end-user demand and visible cashflows, coupled with highly liquid debt and private equity markets, has resulted in a highly competitive market for quality technology assets. Indeed within the UK market private equity was again involved in one third of all deals, either from a buy or sell side perspective. Further activity is likely in 2006 as more businesses seek to develop and create value away from the glare of the public markets.
Consolidation drives larger deals in crucial mid-market
Despite the headline-grabbing mega-deals, the mid-market is still the engine room of technology M&A, with 95% of deals valued at less than €500m. However, even in this segment of the market the trend in 2005 was towards larger deals. With strategic M&A returning to the boardroom agenda in the last 12 months, consolidation has driven a marked increase in deal activity in the €250m-500m bracket.
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