Record valuations and numbers of deals in the telecommunications sector drove worldwide technology mergers and acquisitions in 1998 to half a trillion dollars, according to a year-end report put out by M&A advisors, Broadview International. The 10 largest mega-deals in the telecom sector accounted for 40% of the total M&A value of all technology transactions globally in 1998 with the convergence of voice and data sparking much of the merger traffic.
The value of telecom mergers rocketed 200% to $255.6bn around the globe in 1998 from $86.2bn the previous year. AT&T was the single most acquisitive telecom company in 1998. It alone accounted for $63.3bn in value with three large transactions, Tele- Communications Inc, Teleport Communications Group, and IBM’s Global Network Business. The value of software transactions in North America also almost doubled, rising from $25.6bn in 1997 to $49.7bn in 1998 with the number of transactions up 21% from 888 in 1997 to 1,076 in 1998.
As was the trend in the first half of the year, IPO activity in the US continued to decline. North American IPO activity in the IT, communications and media industries fell 32% from 215 offerings in 1997 to 147 in 1998. When you take a closer look at the IPO market, you discover that more than half of the technology companies that went public since 1992 are trading below their IPO price. By contrast, at the end of 1998, three quarters of those companies that were acquired or merged post-IPO did so at a premium to their IPO valuation, says BroadView CEO, Paul Deninger, elucidating the reasons for the IPO slowdown in North America.
In contrast to the US, technology IPOs in Europe were up 41%, climbing from 110 public offerings in 1997 to 155 in 1998 – the first time the number of IPOs in Europe has surpassed those in the US. One reason Broadview gives for the fact that Europe is still a relative hotbed of IPO activity is that it is easier to float on some European markets than their US equivalents. The requirements to file an IPO on the Neuer Markt, for example, are different and some companies which float on this market would not be able to float on Nasdaq, says Elad Yoran, a senior associate at Broadview. Furthermore, there has been some suggestion that a company with identically the same characteristics that trades on Neuer Markt as one trading on Nasdaq, will trade at a 100% to 200% premium on Neuer, therefore giving non-US technology companies more impetus to file for an IPO in Europe.
