Technology sector ready for M&A glut

Steve Dinneen
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THE second half of 2010 will see a surge in M&A activity in the technology, media and telecoms sector, with more than 80 per cent of firms planning acquisitions this year.

Nearly half of companies expect to secure new bank debt or secure additional support from shareholders, showing an expectation that funding will become more available in 2010, according to new research by professional services firm BDO.

More than half say they will rely on existing capital to make acquisitions.

BDO says this shows renewed optimism in an industry where one in five companies admit to having faced difficulty in securing financing over the last 24 months.

More than 69 per cent say they have had to rely on existing cash reserves because of the reluctance of banks to lend.

Brent Goldman, corporate finance partner at BDO said: “There is evidently huge appetite for acquisitions to meet ambitious growth targets, particularly for businesses in the technology, media and telecoms sector, but there are still challenges.”

He continued: “While there is clearly optimism that the credit tap is going to be turned back on, there are still concerns around raising finance and an ongoing expectation gap on price between buyers and sellers.”

“Goldman added: “The time constraints on management teams might pull the plug on expansion plans, particularly for smaller, resource-constrained companies.”

He concluded: “On average, the companies we are speaking to expect to complete deals around the £20m mark, but nearly one in five planned acquisitions are expected to exceed £100m.”

Around 29 per cent are looking at international market integration, with 57 per cent of these looking at Continental Europe, 57 per cent Asia-Pacific and 54 per cent North America.

This is in contrast to the last two years, when 72 per cent of acquisitions were made to increase market share in an existing market.