A report from GrowthBusiness‘s sister title, Information Age, reveals that companies spent US$46.6 billion (£31.5 billion) in the top 50 publicly disclosed mergers and acquisitions in the first half of the year alone. The average revenue growth of the world’s largest 200 IT companies was 17 per cent over the research period (January to August 2008), and only 15 per cent of those companies reported a drop in turnover, suggesting there is plenty of firepower left for further deals.
The report claims that large companies are seeking to ‘arm themselves against the recession by adding hot technologies’. The vast majority of buyers were US-headquartered, with 33 of the top 50 deals initiated in the States. The UK followed with six deals, while Indian companies, with three top 50 deals in the first half of 2008 alone, were the third most active acquirers: a sign that the country’s outsourcing giants are seeking to grow their global presence.
‘Large companies are seeking hot technologies’
Analysing the location of acquisition targets paints an encouraging picture for the UK. While 20 of the biggest 50 deals involved a US target, the UK followed closely with 17. Moreover, while the American deals were almost exclusively US companies buying their compatriots, 13 of the 17 British targets were snapped up by overseas buyers, suggesting that ‘the UK has become well established as a hothouse for technology development’, according to the report.
The significant cloud on the horizon is profitability. The average net margin among the 200 largest IT companies was around four per cent, with one in four of them making losses. Mature companies tended to be more profitable, with security specialist Check Point Software and Microsoft delivering net margins of 40 and 29 per cent respectively. However, more recent entrants dominated the list of fastest-growing ventures: they include storage systems firms 3Par and Compellent and information management high-flyers Omniture, Autonomy and Netezza.
As companies’ finances come under pressure, consolidation in the sector is likely to continue, and even accelerate, the report concludes.
