Telecoms success puts M&A activity on the up
Sector ‘scores big' in first half of 2006, with 539 acquisitions worth nearly $199.6bn, research reveals
The value of global mergers and acquisitions (M&A) in the IT sector soared in the first half of 2006, owing to a buoyant telecoms market, according to the latest research from analyst Datamonitor.
In the first half of the year there were 539 M&A transactions in the global IT sector worth $199.6bn, compared with 507 deals worth $113.65bn in the first half of 2005.
Tom Jowitt, senior analyst for technology finance at Datamonitor, said: “The breakdown of deals for the different technology sectors reveals the telecoms sector scored big again this year, with 26 deals done to the value of almost $116bn. In the first half of last year 25 deals were recorded in that sector with a total value of $43bn.”
Jowitt added that the size of the telecoms market deals has distorted the average deal size, with large-scale international agreements such as the $89.4bn take-over by AT&T of BellSouth, and the $15.5bn Softbank acquisition of Vodafone Japan.
“We saw more acquisitions in the services space over the last year because it is still quite a fragmented market. There are a lot of medium-sized services companies buying their rivals,” Jowitt said.
He added that previously investors often used an Initial Public Offering as an exit strategy to get their return on investment, but many investors now rely on M&A to grow businesses or exit the market.
Tom Perry, head of marketing at VAR Freedom, said: “We have made one acquisition, but we are exploring options around acquiring a data reseller. There has been tons of M&A activity this year, and there is lots more to come. The converged space is the driving force, with data resellers buying voice players, and vice-versa.”
Perry added that the quickest way to expand in the market is to make acquisitions to increase scale and gain a wider customer base.
“We look at the financial elements of potential targets and access their cultural fit,” he said. “I think such levels of M&A activity will continue for another year or two.”
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