Acquisitions in the technology sector have reached levels not seen since the heady days of the dot-com boom in 2000 but there is still no sign of the predicted consolidation among enterprise software vendors, according to new research out today.
The monthly tracker of merger and acquisition (M&A) activity across 10 European technology industries by Regent Associates shows that the first half of 2004 saw a massive increase in acquisition activity with the number of transactions up by 68 per cent to 1,118 deals compared to 665 in December last year.
Despite the buying binge, Peter Rowell, chairman of Regent Associates, says the anticipated consolidation among enterprise software vendors "has simply not happened". The number of deals in that sector has now remained static for 10 consecutive quarters.
"Whilst the headlines are being made by the big fish - JD Edwards, Peoplesoft and Oracle – it's business as usual for much of the rest of the market," Rowell said in a statement.
Further breakdown of the results shows the UK as the trend setter when it comes to technology M&A. The UK is ahead of the economic cycle and while there was a lot of activity in the first quarter of 2004, UK acquisitions fell by three per cent compared to last year. On the back of this, Regent Associates is predicting an easing of M&A activity to follow in continental Europe over the next two quarters.
The area with the most M&A activity is computer services, with an increase in deals of 83 per cent to 334 transactions. The electronic media and content sector showed the highest yearly increase in acquisitions with 229 deals in the first half of 2004 compared to 93 for the same period last year.
The software sector has lagged behind the other technology areas with only 15 more acquisitions compared to 2003 – a growth rate of 14 per cent.
Commenting on the increased acquisition activity, Rowell said: "There appear to be two very clear catalysts behind this 'acquisition binge'. Firstly, the improved financial performance of many of the major companies and secondly, the substantial resources held by the private equity community."