The number of mergers and acquisitions taking place during the past month shrank to only 56 M&A deals, down from 87 deals in April, and 126 in March. In addition, the total value of the deals also declined in May to a yearly low of just $4.52 billion, compared to the $11.32 billion value of deals in April, and $25.86 billion in March.
On a sector-by-sector breakdown of the acquiring company, the Tech Finance data shows that once again most of the M&A activity during May took place in the broadest segment, simply classified as software. This segment achieved the most deals, with 18 deals worth nearly $600 million. The total value was down from April, when this segment was also the most active, with 18 deals worth nearly $4 billion. This compares to the 28 deals worth $1.16 billion in March.
There were a number of stand-out deals in this sector, with Sun Microsystems and Sybase making two acquisitions apiece in May. Sun paid $25 million for the financially troubled outfit Tarantella, in a bid to improve client interoperability. It also paid $50 million for the NAS technology of Procom Technology, as part of the server giant’s wider efforts to pick up its heels in the storage market, in which the company only has a very small showing.
Of course, the $4.1 billion it has paid for Storage Technology in early June is yet another example of its storage ambitions. Historically, Sun has been a bit ‘hit and miss’ with its acquisitions, and it remains to be seen how successful the latest additions will prove to be.
Meanwhile the other double acquirer was Sybase, which paid undisclosed amounts to acquire Avaki and ISDD, in order to expand its data services portfolio. Avaki makes software that lets users cull, sort and integrate information from multiple data sources, while London-based ISDD makes software for companies to query and analyze structured and unstructured data from fixed and mobile sources.
The second most active market in May was the networking sector, which saw ten M&A deals worth just over $1 billion. The most valuable deal here, by a long margin, was when optical component maker JDS Uniphase bought communications test and measurement firm Acterna for $760 milllion in stock and cash.
Acterna makes broadband and optical test and measurement gear for network equipment makers and the acquisition broadens JDS’s sub-systems portfolio and doubles the size of its communications addressable market to more than $5 billion. It also will accelerate JDS’s path to profitability.
Meanwhile networking heavyweight Cisco was once again an active acquirer, spending $100 million for two outfits in May. It spent $70 million in cash and options to acquire FineGround Networks to boost its Web or application acceleration credentials. It also paid $30 million for Vihana, a start-up formed by former Intel and Cisco engineers in late 2001 to develop semiconductors that resolved bottlenecks in emerging computing and communications infrastructure.
Financial institutions made four acquisitions of tech-related outfits in May, as did telecom outfits. The Scandinavian region was where most of this activity took place, with three out of the four deals taking place there. Norwegian telecoms incumbent Telenor made two acquisitions to strengthen its position in the Nordic broadband market. It paid just over $1 billion for two broadband services provider in Sweden and Denmark as the switch to IP telephony threatens to crank up competition in the whole of Europe.
Chip outfits and multimedia players made three acquisitions each in May, while security and hardware outfits made two deals a piece. There was one acquisition by an Internet-related outfit after electronic commerce developer CheckFree paid $56 million in cash for Accurate Software in a move designed to bolster its claim to be the market leader for operational risk management software.
In the final analysis, May proved to be something of a disappointment on the M&A front, and continued April’s decline in the number of mergers and acquisitions taking place in the IT sector.
The dip in April could have been blamed on the earning session that kicked off in mid April, which meant a lot of companies were in a quiet period before their figures were published. Yet it is harder to quantify why May has proved to be an even quieter month, especially after all the activity in March.
Some have speculated in the past that IT companies are pricing themselves off the market, yet there are reasons to doubt this. Sometimes the industry just enters a slow period where very little happens, and it seems that May has proved to be one of those quiet periods. That said, the forthcoming earning session in June should show the financial health of most IT players remains firmly in the pink.
