M&A activity falls off cliff

Value of deals inked by UK software and services firms falls by more than three quarters in Q3, according to analyst Megabuyte

M&A activity in the UK software and IT services space ground to a halt in the third quarter of 2012.

According to analyst Megabuyte, which tracks M&A, private equity and stock market activity among the UK's 250 top software, IT services and telecoms firms, the total value of deals completed in Q3 fell by more than three quarters on Q2 to £948m.

There were 38 deals but nearly half of the total value was generated by Vodafone's £430m swoop on TelstraClear in New Zealand.

MDNX's acquisition of Griffin and Redstone's acquisition of Maxima were among the other noteable transactions.

"Maybe we were all watching the Olympics or on holiday," Megabuyte joked in its commentary.

Buy-and-build managed services specialist Six Degrees was one of eight firms to make two acquisitions during the quarter.

Private equity activity in the sector was also "uncharacteristically muted", Megabuyte said, with only Kewill's £103m takeover by Francisco Partners, the buyouts of SecureData and Tessella and three incidents of growth funding breaking the dead air.

Similarly, there were no major initial public offerings (IPOs), while secondary fundraising totalled just £35m from four companies, including VAR Redstone and Morse spin-off Monetise (which raised £3m and £22.9m respectively).

Talking to ChannelWeb, Megabuyte founder Ian Spence said: "From a reseller perspective, there has not been a lot going on. Kelway and Computacenter have done some acquisitions but not in the UK, and it does not feel like there are any substantial drivers for M&A activity.

"We are not seeing a lot of interest from private equity in resellers, unless it is in the cloud area."