21 May 2003 The value of mergers and acquisitions in the European technology sector fell by almost half in 2002, according to a report from accountants Ernst &Young.
E&Y said that the value of deals fell from $45.8 billion in 2001 to $23.3 billion in 2002, while the number of individual transactions fell by 46% from 1,767 to 949. More than half of the M&A value in 2002 came from just five transactions.
At 40% of the total, transactions in the software sector accounted for the largest proportion of deals. IT services accounted for 29% of deals, Internet 24% and hardware only 8%.
There were only three ‘mega-deals’ — transactions of more than $1 billion — closed during 2002: AOL Time Warner’s acquisition of Comcast’s cable assets, Deutsche Telekom’s acquisition of IT services company Debis Systemhaus and Microsoft’s acquisition of enterprise resource planning software company Navision.
The average transaction size for 2002 was just over $65 million, but excluding these mega-deals the average falls to just $31 million.
Looking forward to 2003’s M&A activity, E&Y expects consolidation to continue, particularly among small and medium-sized companies and offshore outsourcing companies, who will look to buy up local European players. It also foresees an increasing number of private equity transactions as larger companies restructure.