Credit crunch fails to slow IT consolidation

Number of merger and acquisition deals in the IT industry has rebounded in the past quarter

The credit crunch has failed to dampen the hunger for IT deals in Europe, fourth-quarter figures from Regent Associates indicate.
According to provisional data from the merger adviser, the number of European technology mergers and acquisitions (M&As) leapt from 772 in Q3 to 799 in Q4, defying forecasts that the impact of the US sub-prime crisis could stunt activity.
Peter Rowell, executive director at Regent, said: “After drifting down in the last couple of quarters, the number of European technology deals came back in Q4. The market is not slowing as some had predicted and we have not seen the effect of the sub-prime crisis.”
Scott Nursten, managing director of Cisco Gold partner s2s, bought last week by Bailey Teswaine, said consolidation will continue, but dynamics will change.
“We may see a drop off in highly leveraged, rapid-fire acquisitions of low-profit businesses. But there are plenty of solid professional companies that will whet the appetite of cash-rich firms,” he argued.
Keith Humphreys, managing consultant at analyst EuroLAN, said: “The s2s deal and Alan Watkins buying into Teskys underlines the fact that valuations are now reasonable. If prices have adjusted because of the credit crunch, venture capitalist houses will want to jump in.”
Simon Welch, marketing director at Horizon, said: “These figures do not surprise me. There is clearly a lot going on in the finance market, but that will not stop good deals that make economic sense.”
Jason Rabbetts, managing director of storage VAR Storpoint, said: “If you look at M&A activity, it is generally being done by people who are trusted in the market. There are not as many new entrepreneurs coming onto the scene.”
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