Tech Acquisitions Hit All-Time High

The media and software sectors account for the fastest growth in Europe's merger activity, while wireless is slowing down

Technology mergers and acquisitions (M&A) in Europe have reached their highest ever level of activity, with the value of deals topping $220bn in the first half of 2006.

One of the key factors behind the rise is the increase in the number of multi-billion dollar deals within the telecoms and media sectors, with six acquisitions in excess of $10bn during the first six months of the year compared to none for the same period last year.

The figures are revealed in technology investment bank Regent Associates' latest quarterly M&A deal tracker report.

The two fastest growing sectors for acquisition activity are media, with an 86 per cent increase in the number of deals over the last two years, and software, with a 73 per cent increase over the same period.

Access to content is driving M&A activity in the media industry, especially among entertainment production and information services companies, while the main activity in the software sector is in the acquisition of application software companies.

Peter Rowell, executive chairman of Regents Associates, said in the report: "Major players are seeking differentiation but this is tough to achieve through raw technology provision. Uniqueness can really ever only come from the customer experience that is driven by the applications and related content they use."

The wireless sector, however, actually saw a decline in acquisitions by a third over the last year as service providers adopt a "wait and see" approach towards the next industry trends.

Listed European public companies are the dominant acquirers, with a 61 per cent increase in acquisitions by members of the London AIM market. Venture capital and private equity acquisitions also increased slightly over the year.

Rowell said the trend for consolidation, convergence and aggressive financial restructuring coupled with huge amounts of cash reserves available will see the acquisition phenomenon continue.

He said: "There are no signs of an immediate downturn or crash at present. However, the industry has a history of working in eight-year cycles. It may be significant that the market is warming again just seven years on from the crazy days of 1999."