The number of technology-related acquisitions in Europe fell by 21% to 1,592 in 2002. However, activity was still well above 1998 level. The combined value of acquisitions actually increased by 11% to $144bn in 2002.

There is no doubt that the driving force in 2002 was survival and reorganization in preparation for the shape of the markets in the future. This has resulted in consolidation in sectors such as IT distribution, systems integration, horizontal software applications (such as ERP, CRM and supply chain) and communications services, said Peter Rowell, chairman of Regent Associates.

Corporate divestments of divisions or subsidiaries represented 44% of all acquisition transactions in 2002. This is the highest percentage ever recorded by Regent Associates since the company started monitoring acquisitions activity in 1988.

The research pointed out that leading companies in the market are having to carefully examine their financial performance and market position, and be quite ruthless in disposing of operations that do not meet the criteria for future performance.

The telecom sector has been especially active, such as KPN in Holland, France Telecom and Deutsche Telekom. Others such as Philips Electronics, Alcatel and Landis have been aggressively restructuring their diversified businesses. At the same time companies such as Marconi and Vivendi Universal have been in survival mode, by identifying anything saleable in order to secure their balance sheets.

Regent Associates said it sees encouraging signs from US companies, which are starting to look again at European acquisition targets as they feel more comfortable about the buoyancy of the markets in 2003. Of acquisitions of European technology companies last year, 16% were by US companies.

However, there was clearly less appetite by European companies to embark on acquisition campaigns in other continents. Acquisitions outside of Europe amounted to 160 transactions or about 10% of all deals.

Companies in Germany, Italy and Spain considerably reduced their acquisition activities as most confronted severe downturns in their local markets, which have caused a temporary halt to their international expansion activities.

Source: Computerwire