Thursday, 2 August 2007

M&A "Past the Peak of the Plateau"

As many of you know, I've had a (very) long association with Peter Rowell and M&A specialists Regent Associates. Indeed, at the first occasion I was able, post Ovum, I was appointed as an NED in Apr 07.
Today, Regent has issued its European Technology Acquisition Review for H1 2007. Send me an email on if you would like a full copy or read the Press Release Click here.

Basically in the first half of 2007, 1642 deals were announced, which maintained relatively even activity levels over the last two years. However, the decline in Q2 on Q1 2007 suggests that whilst activity has reached a plateau, we might be nearer to the end rather than the beginning. “Whilst we have no concerns that acquisition activity in the technology sector is about to grind to a halt, the indications are that after two years of stability, we starting to see the beginnings of a gradual slow-down. We are probably just past the peak of the plateau.” said Peter Rowell, Chairman of Regent Associates .

Other indicators that support this shift in market direction include, firstly, the percentage of acquisitions made by the Private Equity community reached 16% of all deals (an all time high) – meaning a greater decline in trade acquisitions. Second, the percentage of transactions that are divestments from larger groups is edging up from the all time low of 27% last year – demonstrating a level of cautious house-cleaning. Third, the percentage of deals undertaken by American buyers was just 12% - suggesting a slight slowdown in their global ambitions.

“None of these factors, when taken in isolation are significant. However, when taken together, they suggest there is possibly a window of 12 to 18 months before we can expect an overall slowdown in activity and consequent decline in valuations.” Rowell concluded

I cannot but agree with Rowell. I think the glory M&A days are over. Private Equity fuelled prices and the days of raising easy "Cove-Lite" money is over. I think that trade purchases will continue - albeit at lower valuations. If Stock Markets continue to "wobble" IPOs will continue to be out of favour.

As Manfred Mann once nearly said "If you've gotta sell, sell now or else you might wait for a long time".

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