Merger and acquisition activity within the information technology arena has reached an unprecedented level this year. And all signs show the Internet is set to become a major driving factor in future activity. According to Broadview Associates Inc, the Internet is the largest single factor responsible for reshaping the information technology mergers and acquisitions landscape. Last year saw an enormous jump in first half activity to over 600 deals in Europe, only 14% below the US level. Figures remained flat last quarter, but trends are changing, said Victor Basta, managing director at Broadview. Information technology companies are growing larger, valuations across the board have risen by about 10% to 20%, and Europe is becoming increasingly important to the global market. When it comes to European acquisitions, the UK remains an active market place. Last quarter, UK buyers accounted for 24% of mergers and acquisitions, slightly up on the US with 23%. Activity in the content provider sector jumped 23%, while valuations soared by about 140%. Basta said the buying frenzy had, and will continue to be, fuelled by a scarcity of great opportunities. There are not that many really focused information technology companies in Europe, so when one comes along he said people are willing to pay big bucks. How long the intense interest in the technology arena will last is anyone’s guess, but he believes the final push could be initiated by the likes of Yahoo! Corp. The company that does not even own its own search engine, but instead licenses it from Open Text Corp on a non-exclusive basis, reported losses for its first year of trading at $634,000 on turnover of $1.4m for the nine months to December 31. Nevertheless, it suc cessfully floated on Nasdaq at the beginning of this year, and the shares leapt 154% to $33 per share in its first day of trading (CI No 2,894). According to Securities Data Corp, this ranks Yahoo! as the third largest first day gain in percentage terms, and valued the loss-making company at a staggering $848m. It’s an inexplicable phenomenon. Even advisory firms such as Broadview can make more in fees than their client’s entire annual revenue, But when companies such as Yahoo! fail to grow by the expected 5,000% each year, shareholders will begin to off-load stock, in the hope, as Basta said, of finding an even bigger fool to invest, which he thinks could start a spiral effect within the entire information technology industry. But Basta shied away from putting a timescale to his predictions. If you had asked me 12 months ago, I would have given it three to six months until the technology bubble burst, he said, and it still shows no sign of slowing down.
