According to pitcbook and McGladrey, with the interconnectedness of IT companies and others with similar skills such as engineers, designers and developers, the industry lends itself particularly well to capital increases.
52% of operations for growth
Expansion deals continued to play an integral role in IT during Q1 2013, accounting for 52 per cent of all acquisition activity in the sector. Interestingly, the percentage of expansion declined during 2012 before peaking in Q1 2013.
"The main reason for this trend may be the valuation problem we were talking about yesterday. Growth deals tend to be at lower relative prices and can add value to existing corporates. It may also have been caused by the increase in activity, especially buyout activity during the last quarter of 2012, which has left this first quarter of the year without deals" analyses Diego Gutierrez Zarza, an expert in private SME financing at ABRA INVEST.
Q1 2013: highlights
In terms of deal size, two companies in the software sector stand out: CCCInformation Services acquired by Leonard Green & Partners for 550M$ and Transaction Network Services acquired by Siris Capital for 518M$.
Also of note is Accessdata, a cybersecurity, digital forensics and litigation support company, which has been acquired by Sorenson Capital for 45M$.
Q1 2013: US IT sales activity in the IT industry
The first quarter of 2013 has been the lowest in terms of exits in the last 3 years. It is expected that in the coming quarters this trend will be reversed and company sales will start to take place.
"One of the reasons to argue for more future activity is the growing number of private equity funded companies that have been around for 3 to 5 years and have a compelling need to unwind positions. It will be a question of how long it takes for prices to adjust based on multiples where the buying and selling prospects meet. It's a vicious cycle, if funds can't divest they won't have the liquidity to invest either," says Diego Gutierrez Zarza.