First Half U.S. Technology M&A Withstands Sluggish Economy

Aug. 2, 2011 - PRLog -- Despite a sluggish economy, technology M&A rode its momentum from late 2010 to enjoy a solid first half in 2011. Although valuations in the technology sector did not rise substantially following steady growth in 2010 (see Figure 1), they remained relatively constant throughout the first half of the year, providing necessary stability and support for the M&A marketplace. Large-cap companies, having accumulated a buildup of cash during the recession, emerged as major spenders, pursuing acquisition growth strategies rather than investing in organic growth.

Whereas technology M&A activity was largely driven by increased valuations in 2010, enterprise interest in the cloud and the renewed deployment of capital from private equity firms emerged as major themes in early 2011. Although the “cloud” may be the most overused technology buzz word in recent memory, it has nevertheless fundamentally changed the landscape of information technology by centralizing everything in one place.

Due to the increased demand among enterprises for products that utilize the cloud, IT service companies offering cloud computing services were attractive acquisition targets in the first half of 2011. For example, Verizon acquired the cloud infrastructure-as-a-service provider Terremark Worldwide in January and CenturyLink acquired the cloud-computing IT services company Savvis in April. This cloud computing trend in technology will likely continue in the second half of the year as large-cap corporations continue their pursuit of cloud computing capabilities.

The first half of 2011 also witnessed increased M&A activity from the private equity sector, which had been very quiet for the duration of the recession. Many private equity firms returned from the sidelines in 2010 to jumpstart their deal flow, and private equity deal volume rose again in the first half of 2011 on the strength of several large April acquisitions. In the same month, Providence Equity Partners took IT consulting firm SRA International private for $1.9 billion, while Infor, a subsidiary of Golden Gate Capital, and Apax Partners both made enterprise resource planning (ERP) acquisitions. Infor acquired Lawson Software for $1.8 billion and Apax Partners spent nearly $2 billion to purchase Epicor Software and Activant Solutions in separate transactions. As economic conditions improve and credit becomes more readily available, private equity firms should remain highly visible in technology M&A.

For a comprehensive analysis of the technology M&A environment in the first half of 2011, download the complete report from Peachtree Capital Advisors at http://peachtreecapitaladvisors.com.

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Peachtree Capital Advisors, Inc. is a New York-based investment bank providing M&A advisory services to growth and middle market companies in the technology, digital media, and cleantech sectors.