Acquisition activity within the UK computer industry increased by 66% in 1988, according to a quarterly survey compiled by company broker Regent Associates Ltd, Richmond, Surrey. During the course of the year, 197 transactions valued at UKP500,000 or above were announced, compared with 119 in 1987. Significantly, companies with a combined value of UKP360m changed […]
Acquisition activity within the UK computer industry increased by 66% in 1988, according to a quarterly survey compiled by company broker Regent Associates Ltd, Richmond, Surrey. During the course of the year, 197 transactions valued at UKP500,000 or above were announced, compared with 119 in 1987. Significantly, companies with a combined value of UKP360m changed hands, up 250% from UKP100m in the previous year. According to Regent’s managing director Peter Rowell, however, it’s still a seller’s market, with demand for quality companies outstripping supply, and keeping prices in some sectors spectacularly high. Survey findings reinforced software and services as the most active market sector, and identified particularly strong demand for DEC and IBM AS/400 software houses and value-added resellers. Overall, 76 transactions in this field were completed in 1988 an increase, in terms of number, of 58% over 1987. The CAP-Sema Metra merger, together with the acquisition of Hoskyns, Scicon and Marcol in the UK, and IBM/Science Research, Gartner and Data Architects in the US, helped push the value of the deals up by 261%. However, the biggest single rise in deal activity, up 107% on the previous year, was recorded within the support services sector, were 60 transactions were completed. Particularly hungry companies include Erskine House, Systems Reliability, F&H (Vistec), and the French-owned Asystel. There was also a 100% jump in the number of communications deals, fuelled by deregulation and the growth of the mobile and cellular markets. By contrast hardware companies, struggling to compete with the Far East manufacturing prices, stimulated only modest interest and low prices. Just 19 deals were made in this sector during the year, chiefly in the peripherals industry. And despite the acquisition of 16 UK publicly quoted companies, the number of company divisions and subsidiaries sold off during the year rose by only 7% to 31 from 29. The survey also showed that of the 29% of acquisitions made abroad, 36 – or 18% – were made in the US. However, the number of European acquisitions rose to 16 from four, suggesting that British companies are beginning to eye the opportunities presented by the eradiction of European trade barriers in 1992. With 13 deals under its belt in 1988, Erskine House continued to be the industry’s most acquisitive company, with Maxwell Communications, the Quadrant Group and STC/ICL clocking up five, four and four respectively. The average price paid for computer companies was a multiple of 22 times the historical aftertax earnings – a drop of 4% from 1987 prices. With two new potential buyers entering the fie-ld, Rowell sees no reason why 1989 should be any less active.
