Prepare for a year of consolidation

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Prepare for a year of consolidation

Simon Quicke
One of the safest bets that can be made this year is that there will be further consolidation in the market and perhaps a few surprises in terms of buyers and sellers.
That safe prediction stems from the very obvious conclusions that can be made by looking at the recent financial results of various vendors.
 
If you broadly accept that the recovery has started, the next thing to consider is which players will benefit from it first and which will exit the downturn in a strong position.

Some vendors have money in the bank, have made acquisitions during the recession, and seem to act as if the downturn is already over. Not everyone can be a Cisco or an Oracle, however, and at the other end of the spectrum are those limping in to 2010 licking their wounds and having to make downbeat forecasts about the future.

Even in those sectors of the market which the recession has left largely untouched, security being one that springs to mind, the performance of vendors varies greatly. The potential for some to be picked up must be a discussion that is taking place in numerous board rooms on the other side of the Atlantic.

The problem for those companies which are still forecasting a fragile or bumpy 2010 is that they have rivals which have come out of the recession without such worries. Most accept that in a period when budgets will be constrained, which is likely to be the case for the next 12 months at least, the battle is going to be about buying market share.

That means there should be some consolidation in a traditional sense, with firms buying each other's market share rather than acquiring businesses, as a means of widening product portfolios.

Market watchers who keep an eye on mergers and acquisitions (M&A) activity have already noted that the market is returning. Although the private equity community remains tight, deals have been done and should continue this year.

What most players in the channel will be hoping for is a relatively quick return to a position of confidence, where talk of the future is upbeat and the losses and fallen revenues of the past year can be recovered.
 
We all want that, but of course some will be quicker to bounce back than others. For the M&A vultures, the next few months could provide some interesting pickings.

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