“We are still writing the numbers that we want to write but the pipeline is a little leaner than it would have been six months ago.” However, IDC Corporate Advisory’s Bob Cowley noted a slowdown in the amount of acquisitions, especially in companies with small market capitalisation.
“Most are now selling significantly below their highs, which were back in November,” he said. “For the small caps, unless they have cash on the balance sheet it is very hard to get deals done. So in other words they can’t use their shares as security to pay for an acquisition; people are not interested in accepting that.
“For small caps with cash on hand, where they have suffered significant market devaluation with their price, valuation of acquisitions is an issue because the private market is holding to its expectation of multiples.”
Australian IT company, digital services provider, Hyro, has suffered from direct exposure to the US financial crisis. The company called a trading halt on September 15 after giant investment bank, Lehman Brothers Holdings, filed for Chapter 11 bankruptcy protection in the US.
Two days later Hyro asked for trading to resume and now, according to CEO, Bill Votsaris, is waiting for a resolution on a deal with Lehman to convert a $20 million convertible note facility and accrued interest into equity in Hyro.
“Of course we are going forward, we were always going forward” he said. “The only thing that is unclear to us is timing in concluding our deal. So that’s what it is, we are talking about a monster that has gone down.
“We now have contact with the receiver of Lehman in Asia. Basically, we are well connected, we are in good dialogue but they have lots of things to deal with. The only thing that is unclear for us at the moment, really to sum it up, is timing factors.”