Technology M&A remains endgame of choice

Late last year, Wired spoke hopefully about technology stocks going IPO in greater numbers in 2008, “after three dismal years.” Some VCs, like Glen Kacher at Integral Capital Partners, forecast technology companies “coming out of a long dry spell; we’re only in the first year of an active IPO market.”

 

 

Nearly six months into 2008, tech IPOs are stalled. Some like Glasshouse Technologies, for example, have been on the back burner for seven months. CNN Money.com said the IPO market “has slowed to a crawl” and “can’t seem to get out of first gear.”

 

And they’re talking about every market, every industry, not just tech. Ouch.

 

There’s still plenty of action in M&A. Yes, deal activity is down 26% from last year (so far), but global deal volume is up 3% to date in 2008 vs. the same period in 2006 according to The Wall Street Journal. Let’s not forget that 2006 was the biggest year in M&A history until 2007 rewrote the record books.

 

Updata Advisors says global M&A deal value in Q1 08 rose to $33 billion – an increase of 32% over $25 billion in deal volume in the comparable quarter last year. Although this is a slight decline (8.3%) from Q4 07, it’s still a damn robust market. With a slowing economy, organic growth is tougher to achieve, so companies keep acquiring to maintain growth rates.

 

Our own lens confirms this reality. More than 35 Beaupre clients have been acquired, most over the past five years.

 

Last week, Microsoft acquired Beaupre client Navic Networks, a cool company that provides real-time TV audience measurement for interactive media placement. They joined earlier Beaupre clients acquired by Microsoft including Groove Networks and Parlano.

 

Updata Advisors think a strong M&A market will continue because “strategic buyers” (think tech industry gorillas) represent 90%+ of the deal activity.

 

It’s all about the endgame folks, and M&A continues to be the endgame of choice.