Q3 technology M&A still buoyant

12 November 2004

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With total deal value exceeding $33bn, the level of acquisition activity during the third quarter of 2004 was maintained, and in some cases increased, across Europe, according to the latest findings from Regent Associates' European Technology Acquisition Review report. Despite the very high number of transactions in Q2, Q3 has seen an even greater increase in activity with a total of 623 transactions being completed. Year on year analysis paints an even more impressive picture. To date, transactions in 2004 stand at 1742, compared to 1018 the previous year, representing an increase in transaction activity of 71%. 'We expect that by the end of Q4 2004, deal activity will approach the heady heights of four years ago when 2,386 deals were announced', comments Peter Rowell, chairman of regent Associates.The biggest surprise in Q3 is that the much hyped and anticipated consolidation amongst the enterprise software vendors has still not happened, with dealflow remaining static for yet another quarter. Divestment by larger companies wishing to jettison unwanted or under-performing divisions or subsidiaries represented 37% of all transactions this quarter and 16% of all acquisitions this year. This figure has diminished substantially since the 51% peak in the early 2003. Acquisitions by UK companies increased substantially in Q3 2004, up 18% to 173 deals, the highest for eleven consecutive quarters. However, this trend is more a function of the economic cycle rather than any specific technological or industrial developments. Interestingly, the number of deals by buyers from most other European countries declined, validating last quarter's prediction regarding the easing of activity across Europe as it follows the UK trend line. However previous growth in buying activity by French, Scandinavian and Benelux companies is expected to resume in the next quarter or two. Activity by German firms continued at a relatively sluggish pace reflecting dampened investment levels that have been witnessed for the past few years.