European tech acquisitions hit all-time high

Key factor behind US$220 billion swell is increase in deals within telecommunications, media sectors.

Technology mergers and acquisitions in Europe have reached their highest-ever level of activity, with the value of deals topping $220 billion in the first half of 2006.

One of the key factors behind the rise is the increase in the number of multibillion-dollar deals within the telecommunications and media sectors, with six acquisitions in excess of US$10 billion during the first six months of the year, compared to none for the same period last year.

The figures are revealed in technology investment bank Regent Associates' latest quarterly M&A deal-tracking report.

The two fastest-growing sectors for acquisition activity are media, with an 86 percent increase in the number of deals over the last two years, and software, with a 73 percent increase over the same period.

Access to content is driving M&A activity in the media industry, especially among entertainment production and information services companies, while the main activity in the software sector is in the acquisition of application software companies.

"Major players are seeking differentiation, but this is tough to achieve through raw technology provision," Peter Rowell, executive chairman of Regent Associates, said in the report. "Uniqueness can really ever only come from the customer experience that is driven by the applications and related content they use."

The wireless sector, however, actually saw a decline in acquisitions by a third over the last year, as service providers adopt a "wait and see" approach toward the next industry trends.

Listed European public companies are the dominant acquirers, with a 61 percent increase in acquisitions by members of the London AIM stock market. Venture capital and private-equity acquisitions also increased slightly over the last year.

Rowell said the trend for consolidation, convergence and aggressive financial restructuring, coupled with huge amounts of cash reserves available, will see the acquisition phenomenon continue.

"There are no signs of an immediate downturn or crash at present," he said. "However, the industry has a history of working in eight-year cycles. It may be significant that the market is warming again, just seven years on from the crazy days of 1999."

Andy McCue of reported from London.