Supporting what Cisco Systems Inc. (NASDAQ:CSCO) told us recently (The Deal Pipeline subscribers can read about it
here), conditions have stabilized to some degree for tech acquirers and potential targets alike, and this is leading to a boost in M&A deals.
It's not much compared to the year-ago quarter, when 721 deals worth an aggregate $173 billion were announced, but the soon-to-be ended second quarter represents a fivefold increase compared to the first three months of 2009, according to data from the 451 Group.
There were 642 deals worth a total of $43 billion so far this period, and the upward trend is set to continue, the research firm found in a new survey of 60 corporate development execs at tech firms.
As 451 Group analyst Brenon Daly points out, "if not bullish, the projections in our midyear survey are much less bearish than they were in our previous survey last December."
Sixty-one percent of those surveyed said they expect an increase in M&A activity over the balance of 2009, compared with the 44% who felt that way in December. Twenty-nine percent said the level of activity would stay the same, and 10% predicted it would decrease, compared to 32% and 24%, respectively, in December.
Of particular interest to sale-minded companies and their investors, valuations have crept up this quarter too. In the first quarter, the median value of tech M&A transactions was the equivalent of .9 times trailing 12-month sales. This quarter, it has crept up to 1.2 times trailing twelve months. Daly notes that this can be attributed to rising equity markets and the fact that many of the companies acquired during the period were struggling to some degree.
Finally, the survey found that asset sales increased during the year so far to 24% of the average overall deal value and 33% of volume. That compares to 9% and 16%, respectively, in all of last year
. - Olaf de Senerpont Domis
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