Technology M&As avoid the global crunch

Full year 2007 saw the value of deals in the sector rise by 44 per cent

Microsoft is attempting a takeover of Yahoo in 2008

The global technology merger and acquisition (M&A) market is proving to be resilient in the face of the credit crunch, according to a report from PricewaterhouseCoopers (PwC).

The full year 2007 saw the value of deals in the sector rise by 44 per cent to €127bn (£101bn) from €88bn in 2006.

Although the year ahead may not show this level of activity, large companies could use the credit crunch as a chance to get ahead of the field, according to Andy Morgan, partner at PwC.

“It would be surprising if 2007 value levels were repeated in 2008," he said. "However, the tougher environment will likely provide significant opportunities for those with the financial capacity, strength of commercial rationale and execution skills to deliver."

The mid-market continued to dominate and drive global M&A in the technology sector in 2007, with deals between €10m and €250m accounting for 88 per cent of global volumes.

Asia, and particularly India, continued to play an increasingly important role in global M&As.

In 2007, there was a tenfold increase in the value of Asian acquisitions in North America, including Wipro’s €291m acquisition of outsourcing company Infocrossing.

In Europe, Asian acquisitions increased threefold in terms of value while domestic M&A activity in Asia increased by 73 per cent, a trajectory PwC expect to continue in 2008.

The report does not cover Q1 2008, but a report earlier in the month by the 451 group found global M&A activity among technology companies fell to $92bn (£46bn) in the quarter, down from $100m in the first quarter of 2007.

However, 2008 has already seen a number of high-profile bids. The year has already seen numerous a pending bid for Yahoo by Microsoft, a $1bn buy-out of Northgate Information Solutions by KKR and the recently announced £190m recommended offer by private equity group 3i for IT service company Civica.