Global merger and acquisition levels in the technology sector broke through the €100bn barrier in 2006, for the first time since the height of the dotcom boom in 2000.
According to figures published on Monday by PriceWaterhouseCoopers, merger and acquisition values were boosted by 18 mega deals, transactions with a value of more than €1bn. The largest of these was the €11.1bn merger of France’s Alcatel with Lucent Technologies of the US.
The number of top level deals was up from 14 in 2005.
Aggressive bids from private equity investors also helped boost deal values in 2006. The second largest tech deal of the year was the €7.4bn acquisition of Philips Semiconductor by an investment group fronted by Kohlberg Kravis Roberts.
There was also heightened activity in emerging markets such as India. Deal volumes between Europe and Asia, for example, rose 167 per cent in 2006, with deal flow going in both directions. The €113m acquisition of the UK’s Azure Solutions by India’s Subex Systems was an indication that companies from the subcontinent are becoming serious bidders for European tech businesses.
Despite the increase in large deals, the mid-market continued to be the main driver of technology mergers. Some 94 per cent of the deals done in 2006 were valued at between €10m and €500m.
“In reality, M&A activity in the heartland of the mid-market (€100m to €250m) has been the one area of consistent growth in the technology sector over the past four years,” said Andy Morgan, head of technology at PwC corporate finance.
Also, although the headlines in 2006 were dominated by deals between newer, internet-based companies, such as Google’s purchase of video sharing site Youtube, it was the more traditional technology businesses that were the driving force behind M&A volumes. Oracle and IBM invested a combined €8.7bn in eight acquisitions in 2006, while Google and EBay spent just €1.4bn.