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Tech M&A activity bursts bubble

Technology M&A activity for Q3 of 2005 in Europe has exceeded the levels of the bubble days of 2000 according to research published by Regent Associates.

In the European Technology Acquisition Review, 820 acquisitions were recorded in the tech sector between July and September of this year, surpassing the previous high of 781 in the first quarter of 2000. The Q3 figure is a 12% increase on the 733 transactions in the second quarter of 2005, and 32% more than the same period last year.

In terms of value, the US$71.5bn achieved in Q3 2005 was a 34% increase on Q2’s US$53.5bn and more than double the amount in Q3 last year. A small number of very large deals contributed to this quarter’s high figure: VNU’s US$7bn purchase of IMS Health, the US$6bn NTL/Telewest merger and eBay’s US$3bn acquisition of Skype.

Peter Rowell, chairman of Regent Associates, says: “As exciting as these valuations are, we are a long way from the crazy levels in the late 1990s, which were based on much hope and hype, and had the inevitable consequences of the crash that the industry has just emerged from. Today’s values are based on careful analysis by buyers or market opportunities, competitive threats and the true worth of the technology and related services.”

The IPO market has not had such a good quarter with only 64 technology companies floating in the first nine months of the year. Rowell says: “Acquisition activity is driven primarily by industry executives who are close to the market and can read the positive signals. IPOs are driven by investors, many of whom can still remember the pain of a few years ago. They still need a lot of convincing that this is a worthwhile investment class.”