Acquisition-hungry channel players should make their move before 2009 because merger and acquisition (M&A) activity is set to slow down and valuations decline, according to analyst firm Regent Associates.
Peter Rowell, chairman of Regent Associates, said: “If any channel firms are looking to buy or sell, they have a window of about 12 to 18 months where they are guaranteed a level of certainty in the technology sector. From 2009 onwards we anticipate an overall slowdown in activity and consequent decline in valuations.”
In the first half of 2007, 1,642 M&A deals were struck in the European technology sector, an increase on the 1,636 deals for the same period last year. However, a decline of five per cent in the second quarter suggests the start of a gradual tail-off.
“We’ve experienced a plateau since 2005, so we have had a good two-year run of healthy levels of M&A activity,” Rowell added. “Whenever a slowdown occurs it usually hits in the US first, then the UK and then the rest of Europe. I think acquisition levels will hold up well in the UK for the rest of this year and a gradual tail-off might begin next year. However, I don’t have a lot of confidence for 2009.”
Telecoms VAR Chess has made 21 acquisitions over the past three years and plans to continue snapping up resellers. Richard Btesh, director of corporate finance at Chess, told CRN: “There are more than 1,000 telecoms VARs in the UK, which is far too many. We have at least another five or six years of consolidation activity left in the UK telecoms space.”
According to Regent Associates’ figures, there were 177 telecoms acquisitions across Europe, mainly in the fixed line and ISP segments.
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