Private equity fuels UK IT M&A in H1

Private equity interest in the IT sector is up on last year, says report

Splashing the cash: Private equity funding has become more widespread in the UK IT channel

Private equity finance has made a welcome return to the IT channel, claims research by Clearwater Corporate Finance.

According to the financial advisor’s biannual mergers and acquisitions (M &A) report The Wire, private equity was involved in 33 per cent of the transactions within the technology sector during the first half of 2010 (H1).

In total, 96 buyouts took place in H1 2010, which is 40 more than during the first half of last year and 19 more than in H2 2009. During this year's first half, 36 deals involved a private equity buyer or seller, up from just 10 in the same period last year.

Carl Houghton, head of the technology sector team at Clearwater, said: “Private equity has undoubtedly returned as a buyer in the technology sector, because available capital and the opening of this pool of investors, alongside stabilising company valuations, is encouraging technology vendors to consider exits.

“In addition, the momentum behind secondary buyouts is likely to build in H2 2010, as private equity houses look to recycle their assets, especially while public markets remain resistant to new issues."

The report also advises public sector-focused businesses to hold off on M &A activity until the government outlines in more detail its plans for ICT projects.

Emma Leathley, senior technology analyst at Clearwater, said she would advise firms to wait until the results of the government’s spending review in October are known before “kicking off any process in earnest”.

“While the news will not be good for most, the market will have more certainty about what the future will bring and it will be easier for both strategic and private equity investors to make a buying decision,” she added.