M&A value down 80 per cent in Q3

Number crunching: a reduction in the availability of credit has slowed M&A activity

The value of mergers and acquisitions (M&A) in the UK technology sector slumped 80 per cent sequentially in the third quarter of 2009 as the volume of deals fell to a 12-year low.

Figures from auditor Grant Thornton found 47 acquisitions were tied up in Q3, the lowest number since 1997. This represents a 17.5 per cent drop from Q2 and a 44 per cent decline on the corresponding period last year.

Third-quarter M&A activity in the UK tech space was worth £656m, an 80 per cent sequential drop-off and 61 per cent down on Q3 2008.

Wendy Hart, partner at Grant Thornton’s technology group, claimed reduced availability of credit had hit the market and that firms looking to sell have had “no particular incentive”.

“Acquirers are bargain hunting rather than making strategic approaches,” she said.

Last month, buy-and-build group Xploite revealed it is taking a break from large scale acquisitions. Chief executive Ian Smith told CRN he had looked at a variety of targets, but that their “price and quality” had not appealed. He claimed smaller targets offered greater value.

“You will see us come back into the market,” he added.

Managed services specialist The Internet Group launched a drive to find acquisitions in April.

Director Mitchell Feldman said: “We have had a lot of enquiries and there is certainly a disparity between what they are asking and what it is worth, but, when you scratch under the surface, they are susceptible to coming round to a reasonable figure.”

Feldman claimed that more patience was needed when hunting larger deals. He added that monitoring firms’ credit watches for CCJs was important.

“We are focused on growing organically; those opportunities are much more tangible than buying a company,” he added. “But we keep our ears close to the ground because there are a lot of companies out there that are not enjoying this recession.”