Convergence to spur tech deals, analysts say

Companies are under pressure to meet demand for products that mix computing, broadcast and telecom technologies, analyst firm says.
Written by Tom Espiner, Contributor

Analysis and consultancy firm PricewaterhouseCoopers has predicted a boom in the information technology sector, driven by digital convergence.

In a report published on Tuesday, PwC said that consumer demand for new technologies is putting companies under pressure to gain a foothold or consolidate their positions in convergence industries. These industries bring together computer, telecommunications, broadcast and recording technologies.

This convergence will see companies forming more strategic partnerships and executing more mergers and acquisitions, according to the report. PwC said that the success of a second technology boom would depend on strategic partnerships that fulfill emerging consumer needs.

"Companies are under pressure to gain footholds in digitally related industries and markets, but executives see mergers and acquisitions as a means of capturing entire beachheads," Andy Morgan, a partner at PwC, said in a statement.

"To be a player in today's integrated technology landscape, they must quickly take advantage of others' core competencies," Morgan added.

Already, 2006 has seen several high-profile takeovers and alliances, including a partnership between Yahoo and eBay.

Executives have learned from the dot-com bubble and are approaching partnerships and company purchases more cautiously and strategically, PwC believes. Just over half of the chief executives interviewed for its survey favored alliances over mergers or acquisitions.

"Partnerships often offer less permanent financial risk to a corporation, although alliances may also move too slowly to capitalize on a fast-moving opportunity," PwC said.

Software development companies were listed by survey participants as the most likely target for acquisition, followed by business information content developers, wireless companies, entertainment content developers and consumer electronics device makers.

The survey is called "Technology Executive Connections--Shaping digital convergence through mergers and acquisitions."

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