M&A activity recovering on back of improved Q4

Technology mergers and acquisitions in the UK fell by nearly one third last year but the recent signs of stability in the economy indicate more action will return in 2010.

Figures by Ernst and Young show that 101 UK companies were sold or joined forces in the 12 months, down 28% on the previous year, however M&A activity in Q4 was up 10%.

Globally, deals fell 29% to 1,886, though the data also showed an upturn in the final quarter of 2009, rising 32% to 488, said Neil Hutt, transaction advisory partner at the accountancy giant.

"Companies faced a variety of pressures in 2009 - from managing excess capacity and expenses, to drops in sales [due] to tightened credit markets - and they faced them with renewed emphasis on financial and operational flexibility," he added.

The types of firms in demand included mobile content providers, games developers, social networking firms and payments vendors.

The total value of the deals in the year fell 2% worldwide to $94.8bn although 7 of the top deals broke through the $1bn mark in the second half of the year, boding well for 2010.

"It looks like 2010 could be a good year for technology M&A, given the continuing stabilisation of the global economy, technology innovations, increasing company valuations  and the improved operating performance of technology companies through 2009," said Hutt.

However he warned businesses should be prepared for "continued market volatility" and gave common sense advice, "successful companies will conduct detailed upfront analysis, comprehensive due diligence...before entering into any deal."

The research backs findings from Regent Associates which last week said M&A in the European ICT sector were up 12% in December and valuations were on the up.