M&A activity to pick up in 2009

M&A activity to pick up in 2009

Industry sources have flagged a possible rash of merger and acquisition activity in coming months as businesses reel from the economic downturn.

Unlike sections of the economy such as banking and resources, there has been a lag in the impact on the IT industry, Gartner research director, Neil McMurchy, claimed.

“What is an absolute certainty is there will be an increase in the number of businesses that are at risk of not continuing,” he said. “The rubber is going to hit the road at the end of this quarter as the Christmas period has masked a lot of the bad stuff. Most organisations generally have a pretty slow January – imagine what that does to cash fl ow if you are basically operating off your credit cards and overdrafts secured by your home mortgage.”

Managed services provider, Ethan Group managing director, Andrew Rayment said it was in informal talks with a potential acquisition target. He was surprised more companies weren’t hitting the wall.

“There is a lot more desperation in the target company’s voice than otherwise might be the case,” he said. “I don’t think you will get willing sellers, you will get desperate sellers right now.”

Managing director of technology integrator, S Central, Peter Mavridis, predicted more acquisition opportunities this year as company valuations get re-assessed. “Right now, there are still business owners who haven’t realised the changes in valuation. So, we are taking a wait-and-see approach but at the same time we continue to look at opportunities that come our way,” he said. “The sticking point now becomes evaluation and whether on an on-going basis these businesses can keep their client contracts.”

Thomas Duryea CEO, Andrew Thomas, said although it had always focused on organic growth, there had been a slowdown in the number of companies approaching him. But he was also sure of fire sales in the not too distant future.

“Over the last 18 months, there have been a few [companies] that have come talking, but we haven’t been interested and haven’t progressed. But that has dried up from our perspective; we haven’t had any knocks on the door for a while.”

Westcon general manager, Wendy O’Keeffe, agreed there would be an increase in M&A activity and said the distributor would continue pursuing take over opportunities.

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