I just got a hold of an illuminating (and depressing) report on tech deal-making through the first two months of 2009 from the Boston investment bank America?? Growth Capital. In short, deal-flow has ground to a near-halt, slowing down even from last year?? languid pace.
Among the low-lights:
* Wall Street transaction activity, including global technology, is down 50% year-over-year, down 60% compared to 2007, and down even more on a dollar-value basis. So far this year, only 6 out of roughly 400 M&A global technology transactions have had values of $100 million or greater.
* On the technology financing front, there have been no follow-on offerings or IPOs, and there have been only 11 private investments in public equities (PIPEs) and 91 Private Placements of $5 million or greater YTD, as compared to 37 PIPEs and 190 Private Placements in the same time period last year.
* America?? Growth Capital expects technology transactions for 2009 and the foreseeable future to be dominated by $2-$30 million private placements, some PIPEs, very few public offerings, and 90% of M&A transactions valued between $1-100 million.
* The top 11 technology giants, such as IBM, Microsoft and Cisco, have only announced 8 deals YTD (compared to 16 at the same time last year).
* The top 15 Financial Buyers of technology, such as Warburg Pincus and the Carlyle Group, have yet to do a deal!
* Strategic and Financial Buyers have the cash for acquisitions and are attracted to the depressed valuations (public valuations have dropped over 50%), yet have been reluctant to deploy capital as these valuations have continued to fall.
* Sellers are also reluctant to strike a deal given battered valuations and are generally opposed to relinquishing control (and their current income) during these turbulent times.
- Spencer Ante also publishes the Creative Capital blog. Click here to see more.