A study by mergers and acquisitions advisor Broadview Associates L.P., released today, predicts that nearly three-quarters of North American information technology companies are likely to pursue mergers next year, up from 64 percent which did so this year.
"The pace of activity is accelerating because IT companies have found M&A; transactions to be a cost- and time-effective tool for implementing their corporate growth strategies," said Charlie Federman, chairman of Broadview Associates, in Fort Lee, N.J.
Of some 300 companies across North America questioned in the survey that had completed mergers or acquisitions this year, more than 70 percent "consider all or most of them a success," Federman said.
The study breaks the industry down into nine categories, and of these segments, software products makers were judged most likely to be targets for M&A; activity next year, followed in order of likelihood by Internet-related companies, software service providers, database companies, online service providers, telecommunications companies, hardware makers, outsourcing companies and systems integration companies.
Most M&A; activity next year is likely to involve transactions within, rather than across, technology sectors, Federman added.
"IT convergence has become less of an impetus as economic factors increasingly fuel M&A; activity," he said.
Respondents cited increasing shareholder value, increasing earnings, increasing revenue growth and achieving leadership in their particular market segments as their major goals for M&A; transactions, according to the survey.
The largest companies surveyed, those with $250 million or more in annual revenues, were most likely to pursue M&A;, with 76 percent of respondents reporting plans for mergers or acquisitions in the coming year.
The complete "IT M&A; Forecast '97" survey is posted on Broadview's World Wide Web site at www.broadview.com/.