Investor confidence in technology remains shaky as the number of completed corporate finance deals continues to fall this quarter. The number of transactions is at its lowest since the last quarter of 2001 and average deal size was a mere GBP4.7 million, the second lowest for the past two years, according to the PKF quarterly review of fund raising in the new technology sectors.
The review, which uses CORPFIN data reveals that GBP319 million was raised in 37 deals representing a fall of five per cent in funds raised and a 25 per cent reduction in total number of deals. Telecommunications dominated the quarter representing 53 per cent of the value of completed deals. Although the number of deals in the software sector was high, average deal size was low at GBP2.5 million.
The main use of funds is cited as development, funding acquisitions and working capital and is consistent with previous quarters. For the second quarter running, the techMARK 100 index fell by over 25 per cent during the quarter. By comparison, the FTSE Index was more robust, falling by six per cent during the quarter.
Rosemary Clarke, partner at PKF, said: “Investor confidence in the technology sector remains low, but we are confident that there will be a recovery although the timing remains uncertain. But she said until confidence returns to the market as a whole, investors will not return to technology stocks.
But it is not all doom and gloom. Ajay Chowdhury, managing director of technology investor IDG Ventures Europe, says: “The number of deals is certainly falling, but there are some encouraging signs and the quality of deal flow is certainly improving.”
Less encouraging for the market are the number of funds that are reducing their size and ceasing investment activity. A recent high profile example is GE Equity, which has closed to new investments and is now concentrating on exiting its existing portfolio of mainly TMT companies with the aim of maximising value see evcj November, page 15.