Acquisition activity between US and European IT companies hit record levels last year as companies on both sides of the Atlantic bought their way into new markets.
The total number of announced transatlantic acquisitions by IT companies leapt 21 per cent in 1998 to 467 from 390 the previous year, according to a new report, titled Transatlantic Transactions in the IT Sector, from IT consultancy Regent Associates.
US organisations wanting to establish themselves in Europe opted to buy their way in rather than establish businesses from scratch in 1998, according to Regent. Key targets were European IT recruitment and contract staff businesses.
Meanwhile European IT companies went on a corporate shopping spree in North America, principally targeting packaged software companies.
"Many of these European companies enjoyed a buoyant period in 1998 because of the increased level of activity connected to the Y2K problem and the introduction of the Euro. This inflated their values in the market," said Jim Pullen, author of the report.
US and Canada based companies continued to dominate the spending, announcing 320 purchases in Europe in 1998, compared to 275 the previous year, an increase of 16 per cent, according to Regent.
The number of European companies making acquisitions in Europe jumped 20 per cent to 147 compared to 115 in 1997. Pullen attributes the increase in corporate activity to high US share prices and profitability and increased access by European companies to capital.
"The value of many of these deals is often never divulged but the indications are that 1998 was a record year for transatlantic IT acquisitions in financial terms," Pullen said. "There were a small number of very large deals that were very significant."
Software and services companies were by far the most important targets for organisations on both sides of the Atlantic: 37 per cent of all North American acquisitions were in this sector, compared to 18 per cent in information services, 13 per cent in applied technology and 12 per cent in communications equipment.
Computer hardware, support services and support equipment made up the rest. The targets of European companies were broadly similar in their spread: 48 per cent in software and services companies; 16 per cent in applied technology; 11 per cent in information services and 10 per cent in communication equipment.
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