The need for cash and instinct to survive has kept the technology sector in the number one spot for two consecutive years in terms of number of merger and acquisition (M&A) deals, according to QuarterCAST, the M&A forecasting report issued by Ernst & Young National Office West (EYNOW).
At a time when merger and acquisition activity "fell off the cliff," from more than 9,500 deals in the year 2000, to more than 7,800 in 2001 and slightly more than 3,300 deals for the first half of 2002, "technology has consistently lead the pack," according to Gregory Soukup, partner and co-director of EYNOW, a group dedicated to transactional tax services.
In the years 2000, 2001, and the first half of 2002, technology accounted for 2,204, 1,438 and 559 of total deals, respectively. Following, but not close behind, are the categories of "miscellaneous services" and "brokerage, investment and management consulting," which took the number two and three positions, respectively, in seven out of the past nine quarters. Additionally, the technology sector has consistently appeared in the top ten with respect to value of transactions, according to QuarterCAST, which tracks deals and valuations for U.S. targets and acquirers.
"We can still see the skid marks left over from the first quarter of this year, when M&A tech valuations hit the floor at $3.58 billion," said Joseph Doloboff, partner and co-director of EYNOW. "That was painfully lower than the $60.32 billion in tech valuations we saw in the first quarter of 2000. On a more optimistic note, second quarter valuations indicate that conditions may be improving."
After eight steep quarterly declines, technology valuations finished the second quarter up at $10.28 billion, allowing tech to take the number one position in sector valuations.
QuarterCAST also reports that the increase in valuations wasn't isolated to just the technology sector. Although the number of aggregate deals continued to decline from 1,722 transactions in Q1 2002 to 1,634 in Q2 2002, aggregate valuations increased from $75.1 billion to $98.1 billion, respectively; an increase of 30.5 percent.
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