Tech M&A Jumps 48%, Helped by Private Equity

By Robert Hertzberg  |  Posted 2007-01-29 Print this article Print

Transactions outside the U.S. helped make 2006 the busiest year since 2000.

Technology mergers and acquisitions jumped 48% in 2006, helped by high liquidity worldwide and an increase in buyouts outside the U.S.

Technology M&A grew to $244.1 billion from $164.6 billion in 2005. That made 2006 the biggest year for technology mergers since 2000, according to Innovation Advisors, a New York-based investment bank that specializes in technology.

The appetite for mergers was strongest outside the U.S., particularly in Europe, China and other parts of Asia. Non-U.S. activity accounted for more than 48% of all transactions during the year, up from 42% in 2005 and just 28% in 2004.

"The message is that the world is growing up and there's a lot more deal-making activity happening outside the U.S.," says Eric Gebaide, a managing director at Innovation Advisors.

Internet companies focusing on "the power of the group" have been at the center of the action everywhere, according to Gebaide. He pointed to Google's $1.65 billion acquisition of YouTube, which followed the big Internet acquisitions of 2005: eBay's buyout of Skype for $2.5 billion and News Corp.'s purchase of MySpace for more than $600 million.

"Those companies are growing fast and there are a lot of them out there," Gebaide says. "More are coming."

Technology M&As were also helped by money burning holes in the pockets of newly public companies and private equity firms. Indeed, the biggest deal of the fourth quarter was the Carlyle Group's $7.27 billion buyout of Japanese chip maker Advanced Semiconductor Engineering.

Private equity firms will continue to play a big role in technology M&A this year, when Gebaide says transactions will rise another 11%, to at least $270 billion.

"They've got to grow and divest and change over their companies in order to effectuate their strategies," Gebaide says of the many tech firms now backed by private equity concerns. "They're going guns ahead."


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