Nearly two-thirds of UK technology companies are optimistic about the mergers and acquisitions (M&A) outlook over the next 12 months, according to the latest Deloitte UK Technology M&A report.
Joel Greenwood, head of Deloitte's TMT M&A Advisory, argued that the results show that market conditions are picking up.
Businesses are taking a back to basics approach and thinking strategically about the benefits of acquisitions, and are "doing deals and following through" , he said, citing the HP-Palm deal as one such example.
This view is supported by 75 per cent of respondents to the Deloitte report, who said that "an acquisition aligned with company strategy" is key if the merger or acquisition is to be successful.
The figures show that there were just under 160 UK acquisitions in 2005. This number dropped to around 50 during the recession, and started to pick up again only during the back-end of 2009.
Similarly, the number of IPOs bottomed out during the recession. Despite Greenwood's view that "we are starting to see a trickle of flotations", the report found that 39 per cent of respondents still do not think that it is a good time to float a UK tech company.
"This probably reflects a wide range of unknowns, ranging from the delivery of pricing expectations, to the availability of debt finance and an ongoing low rate of investment," the report said.
Market consolidation and cash-rich acquirers remain the biggest drivers behind M&As, but distress driven deals and undervalued targets are in the top five.
This indicates the lingering effects of the recession, and in general an M &A is influenced by a combination of factors, according to Deloitte.
The companies surveyed were also asked what they think the new government should do to help UK technology businesses.
Tax incentives for companies and individuals that invest in growing technology companies are seen as a key driver for growth of the UK tech sector. Unsurprisingly, 55 per cent would like to see the government implement such a system.
"This is one of the many challenges that the new government faces to promote growth in this sector. At the moment it is unclear as to what the government will do," said Greenwood.
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