A number of companies in the IT and telecommunications sector are making acquisitions and merger offers to capitalise on lower prices due to market pessimism, an industry expert says.
The comments come after a number of industry acquisitions have been finalised, including the purchase of technology consultancy firm Aipex by SMS Management & Technology for $13 million, and UXC’s recent purchase of application integration services firm Glue AP.
Meanwhile, Amcom Telecommunications has placed itself in a trading halt pending an announcement, with some analysts predicting the acquisition of a small tech company to help it roll-out equipment.
Paul Hauck, who runs ICT Strategic Services, says there has been a real “ramp up” in activity in the ICT sector, with his firm dealing with six unexpected offers during September when it would usually deal with one or two a year.
“There has been a fair amount of activity in the IT industry, and that is because of the way the industry is set up. There are very few mid-size companies, and a number of small companies. There are many larger firms which try to acquire small companies in a bit of a strategy to create a mid-size company.”
“In this industry there is a lot of capital value in a mid-size company as opposed to a smaller industry. We see this type of move a lot in this industry, and traditionally you have companies like UXC which will go back to the smaller companies for more power and market share. These larger companies are built in this process.”
Hauck says a number of companies believe they can grow by obtaining market share, as all other avenues of growth have been diminished by pressures from the downturn.
“This is an interesting time, because in the last month or so we’ve seen a huge wave of people trying to mount these exercises. I think it’s because of the pessimism in the market, whether it’s justified or not. It seems to be dissipating, and I think buyers are trying to get a deal down while there is still some downward pressure on prices.”
SMS Management & Technology said its acquisition of Aipex will add $13 million to its revenue, with chief executive Tom Stianos saying in a statement the deal will be integrated over the next three months and will add new capabilities to the company.
Meanwhile, speculation is still strong over the details of Amcom’s trading halt. According to a Communications Day report this month, Amcom chief executive Clive Stein said the company is intending to roll out technical equipment on the east coast.
An announcement is still yet to be made from the company.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
