Updata Capital, Inc., an investment banking firm specializing in mergers-and-acquisitions (M&A) for the information IT industry, released recent research explaining what is behind the recent increase in M&A activity in the financial technology sector.
Updata's research explains how and why the following factors are causing an increase in M&A transactions: first, the improved economy and resulting health of the capital markets provides a rebound in business confidence and relative price improvement; second, IT budgets across financial institutions are on the rise; third, the impact of mandated regulatory changes; and lastly, how several new technologies and business models are finally becoming viable and creating a rush to gain scale and critical mass to enhance profitability and accelerate sales.
"In the financial technology sector, we're seeing consolidation accelerate at an unprecedented rate," says Joel Kallett, a Partner at Updata Capital. "So far this year, approximately 44 deals have closed, which is 30% higher than the same period last year. We anticipate that 2005 will truly be an exceptional year in terms of strategic deal activity with numbers of transactions increasing another 30%-40% above 2004 levels. As several very promising companies are looking to do some private-to-private M&A to position themselves to execute on an IPO in the next 12-18 months, we expect to see quite a bit of activity in the sub-$50 million transaction size."
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