M&A: Tech times are changing
Technology companies have to swallow harsh market truths – and some pride – and give up independence.
As Microsoft, Google, and now Yahoo vie to buy a stake in America Online, all eyes are on the technology M&A sector. Seth Ferguson, joint global head of technology M&A at UBS, reckons the market has not seen the last of large deals in this area. “Many companies valued at $750 million to multiple billions of dollars are in strategically vulnerable positions,” he says. “In the next five years, you’re going to see a lot of increased consolidation between these companies.”
One tech industry banker says this is partly because “it took years post-bubble for the large tech companies to figure out what they wanted to be”. But Ferguson says the consolidation between large tech companies is driven by the search for growth opportunities. Management teams are realizing that a merger or acquisition might be the only route to growth in the current market environment. “The growth all tech companies have historically expected is much more elusive these days,” says Ferguson. “People have now accepted that the Nasdaq isn’t going to go back to 5000 this week and are looking for other options.”
In some cases, M&A is not just a necessary evil but has become distinctly desirable.