Technology sector lifted by record M&A activity

The technology sector was lifted by record levels of merger and acquisition (M&A) activity in the final quarter of 2006, despite a steep fall in the number of transactions completed in the wider UK market.

Expenditure by UK firms on acquisitions at home and abroad plunged from £26.3bn to £14.4bn between the third and fourth quarters of 2006, according to the Office for National Statistics (ONS).

But data from IT analysts Regent Associates obtained by CRN shows the IT sector clearly bucked the trend as M &A action continued apace.

Regent chief executive James Calvert, told CRN: “The number of deals in the final quarter was slightly down, but activity is still at a record level. We see this quieter period as a plateau, not a downturn.”

According to Regent, UK and Irish firms completed 224 M&A technology deals in Q4. That is down from a record 253 deals in the previous quarter, but up on both Q1 and Q2 2006.

Henrietta Lacy, consultant at analyst Pierre Audoin Consultants, said: “A number of companies are close to saturation point among their existing customer base in the enterprise market. As a result, some firms are looking to break into the SME market.

“However, to acquire these customers requires time and patience to get ahead of competitors. A number of cash-rich companies are choosing to jump start this by acquiring a firm that already has the desired customer base.”

Martyn Vaughan, statistician at the ONS, attributed the wider M&A slowdown to a lack of large deals during the final quarter of the year.

“Although activity is down, it is still well within normal limits,” he said. “One shouldn’t read too much into this.”

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