Tech acquisitions return to "sensible" $134bn high

Merger and acquisitions (M&As) in the European technology sector have bounced back to a three-year high of $134bn following the dot-com crash in 2000.

The number of M&A deals last year across Europe was up 69 per cent on 2003 to 2,405 and the total value increased 36 per cent to $134bn, according to the findings of the Regent Associates European Technology Acquisition Review report.

But that is still someway off the $764bn high seen at the peak of the dot-com M&A activity in 2000 and there are now far fewer individual "super deals" in excess of $10bn.

Peter Rowell, chairman of Regent Associates, said this time round the increase in M&As in the technology sector is much healthier and more sustainable than last time around.

"Everybody is being sensible now. We are seeing sensible valuations based on logical cash flow analysis. This is not the get rich quick situation [of the dot-com boom]. It is based on solid fundamentals," he said.

Rowell said the UK is the "front-runner" in M&A deals in Europe and that much of it is coming from bigger companies acquiring more innovative small tech firms.

The hotspots in the industry are in content and applied technologies, according to the report.

Rowell said: "The next phase is going to be content-driven. The TV and media companies are looking for content-delivery technologies."

The report also claims there are signs of the end of the downturn market in IT services and software, with particularly strong growth in IT recruitment and resourcing companies.

Commenting on the software and IT services figures, Richard Holway, analyst at Ovum Holway, predicted the upwards trend will continue through 2005.

"There is no reason why we shouldn't continue to see lots of M&A activity throughout this year. The IT industry has now reached a level of maturity and growth for many players will have to come through consolidation," he said.