(By Anthony Miller – Sunday, 26th April 2009 9:00pm). First quarter M&A activity in the European tech sector was rather a mixed story. Latest data from Regent Partners showed transaction volumes rose 3% over Q408 to 715 deals, albeit this is still 9% down yoy. However the combined value of these acquisitions has fallen yet again to $13.8b, 25% down from the $18.5b recorded in the previous quarter and less than a third of the $45b worth of deals in Q108. It’s clear that the credit squeeze while not materially affecting the smaller deals, is hammering the megadeals.Regent reported a small uptick in UK buyers (1% qoq) with 161 deals, though France with 89 deals showed the greatest increase (+35%). North America buyers dropped by a third (55 deals) though Regent expects the stronger dollar to reverse this trend. Most popular acquisition targets across the board were in Internet Services, Communications and Media/Content. IT services deals were flat overall, though resourcing, desktop services and consulting transactions rose.
The valuation story isn’t all bleak. The decline, as measured by PE ratio, slowed, leaving the sector average at 12.2x, with most subsectors at a premium over quoted counterparts. Indeed, the average price-to-sales ratio across the sector rose from 0.97 to 1.01, the first increase since mid-2007.
So, with zero tech IPOs anywhere in Europe so far this year, owners’/investors’ exit options are rather limited. Those that eschew ‘unrealistic’ bid offers may find the alternative even more uncomfortable.
We will examine the UK software and IT services M&A scene in more detail in our forthcoming IndustryViews M&A quarterly review.
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