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Mergers and acquisitions in the technology sector are expected to be prevalent this year in spite of the global credit crunch, with transactions set to reach €100bn ($157bn), PwC says in a report to be released on Monday.
Takeover approaches, such as Microsoft’s bid for Yahoo, suggest that large deals are far from disappearing in the tech market, said Andy Morgan, tech sector leader at the professional services firm.
In addition, an increasing number of deals coming from Asia is expected to keep deal flow high in 2008.
In 2007, there was a ten-fold rise in the value of Asian acquisitions of US companies – to €4.35bn against €350m the previous year – led primarily by India.Wipro, the Indian IT services company, for example, bought US rival Infocrossing for €291m.
Mr Morgan said: “We are seeing a more serious approach by Indian companies. If they want to take the next step in developing their front end customer relations in the western markets, they will need to make acquisitions.”
Last year was a vintage year for tech deals, with transaction value up 44 per cent to €127bn.
While 2008 is not expected to reach these levels, it is still expected to be ahead of 2006 performance, when €88bn worth of tech deals were done.
With the falling dollar, acquisitions by US companies have decreased.
Historically, US buyers have accounted for about 70 per cent of UK cross-border tech deals, for example, but this has now fallen to about 35 per cent, said Mr Morgan. However, buyers from other regions are more than making up the difference.
Private equity backed tech deals have also continued throughout the first quarter of 2008. PwC said 15 such deals with a total value of €3.7bn have been announced in the quarter in line with the 17 with a €2bn value in the same period in 2007.
Nordic Capital, for example, has launched a €1.1bn bid for TietoEnator, the Nordic IT services group, while Civica, the public sector software company, is set to be taken private by its management in a £190m ($380m) deal backed by 3i.
“The demise of the private equity deal has perhaps been overstated, at least in this sector,” said Mr Morgan.
|Jul 07||Tyco Electronics||Demerger from Tyco International (US)||16.4|
|Oct 07||CDW (US)||Madison Dearby Partners: Providence Equity Partners (US)||5.2|
|Oct 07||Business Objects (France)||SAP (Germany)||4.8|
|May 07||aQuantive (US)||Microsoft (US)||4.4|
|Oct 07||Teradata (US)||Demerger from NCR (US)||3.7|
|Oct 07||Solectron (US)||Flextronics International (Singapore)||3.4|
|Jan 07||Symbol Technologies (US)||Motorola (US)||3.1|
|Apr 07||Agere Systems (US)||LSI Logic (US)||3.0|
|Apr 07||Hyperion Solutions (US)||Oracle (US)||2.4|
|May 07||WebEx Communications (US)||Cisco Systems (US)||2.2|