More technology M&A anticipated

07 October 2004

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New research from Close Brothers Corporate Finance reveals that the first half of 2004 witnessed a 60% increase in the number of mergers and acquisitions in the technology sector when compared to the first six months of 2003. The investment bank noted a dramatic increase in the proportion of European technology firms being taken over by North American companies as well as a continuing interest on the part of private equity funds to seek buyout and acquisition opportunities. Close Brothers Corporate Finance believes these trends reflect a return to more aggressive corporate activity in the sector, tempered by continued fragility in public market support for technology in Europe and a paucity of natural consolidators within the region.

The most notable trend in technology M&A during the first half of 2004 was a near doubling in activity from North American acquirers who accounted for over one third of all takeovers in the European region. Close Brothers believes that, despite the relative weakness of the dollar, these companies are continuing to exploit a ratings differential that sees NASDAQ-listed technology stocks trade at a significant premium to their European counterparts. Close Brothers also believes that the fragmentation of the European technology industry presents opportunities both for North American companies seeking digestible acquisitions as a means of geographic expansion, and for financial buyers looking to participate in consolidation, often by using an existing investment as an acquisition vehicle. Despite an upswing in the volume of deals there was no return of the 'mega-merger' and typical deal values were unchanged year on year. Only 13 deals in the first half of 2004 were valued at over EUR 100m and the average value was around EUR 60m (versus EUR 58m in 2003).