IDC: 'Record' M&A activity in tech sector for Q2

Deals doubled in second quarter of the year, particularly in the enterprise applications space, analyst claims

The second quarter of 2011 was the busiest for merger and acquisition activity since the economic crisis of 2008, IDC has claimed.

In its latest Worldwide M&A Watch report, the analyst said there had been a "record number" of 897 ICT M&A deals, a 50 per cent increase since Q1 2011.

In particular, the internet sector saw deal volumes jump from 127 to 223 in the space of one quarter.

Private equity-backed M&A deals also mushroomed in Q2, with 12 of the 36 deals concluded in Q1 being in the enterprise applications field.

IDC claimed the IPO market continues to rebound as a popular exit strategy for firms.

In the second quarter of 2011, 19 ICT companies went public, raising a total of $5.14bn (£3.18bn), compared with $1.1bn in Q1.

Ryan Patterson, manager of IDC’s Private Vendor Watch Service, said the hunger had shifted towards non-US companies. “We expect the current pace to continue for the remainder of the year, which will establish a new renewed normalcy for ICT M&A. ICT companies worldwide, after cutting costs and restructuring, are coming out of recession with more cash on their balance sheets and are seeking acquisitions for growth,” he said.

The fact that major players such as Microsoft, Google, Apple and Facebook are sitting on huge cash piles means they can pursue megadeals across a broad range of technology fields, Patterson added, enabling them to accelerate revenue growth and increase their value to shareholders.

Additionally, he said major PE funds that raised capital before the recession still have "substantial resources" for acquisition, made evident by the large number of PE-backed deals in Q2.

But he warned conditions are still volatile.

“The recent US credit rating downgrading and instability in euro markets may have a negative influence on the global economic recovery. This still may lead, for example, to a decline in public company valuations and them delaying or withdrawing their IPO plans,” Patterson said.