It's a neck-and-neck race to 40.00 between IIXL and USWB!!
Article....
Consolidation Activity Slows Among IT Services Companies; De Bellas & Co. Reports 334 Mergers and Acquisitions Since January
October 22, 1999
HOUSTON, Oct. 21 /PRNewswire/-- Statistics from De Bellas & Co., a leading specialty investment banking firm, indicate that 334 of the nation's information technology (IT) services businesses were sold or merged in the first nine months of this year. By contrast, in the first three quarters of 1998, business combinations were reported by 402 IT Services companies, making this industry one of the most rapidly consolidating segments of the domestic economy.
In the recent July-September quarter, 71 mergers and acquisitions (M&A) were announced by 52 buyers, which compares to 124 transactions completed by 92 buyers during the same period in 1998. De Bellas & Co. defines a " transaction" as a completed merger or acquisition or a significant equity investment. The firm's statistics include domestic as well as cross-border agreements involving U.S.-based participants.
De Bellas & Co. monitors nationwide consolidation activity to support its investment-banking specialty as an advisor in all facets of M&A for IT clients. The firm tracks business combinations across a wide range of IT Services, including staff augmentation, systems integration, ERP providers, network design, Web development, applications development, and e-commerce, Internet and IT solutions providers.
"After a couple of years of consolidating at break-neck speed, mergers in the IT Services arena have slowed considerably," says Bill Graves, managing director of De Bellas & Co.
The slowdown in this sector coincides with a general decrease in M&A activity across the overall domestic economy. According to Thompson Financial Data Services, $322 billion in domestic M&A transactions were announced in the third quarter of 1999. This performance marks the lowest level of U.S. M &A activity since the first quarter of 1998, when volume was approximately $263 billion.
"Still, our ongoing research shows that prospective buyers remain very interested in finding good candidates for acquisition," says Mr. Graves. "In other words, the number of buyers in the market is high."
The number of companies completing transactions involving IT Services firms climbed from 182 in the first nine months of 1998 to 189 in the same period of this year. The most popular targets for acquisition in 1999, as in 1998, have been IT solutions firms. However, Internet services providers, or ISPs, have also shown strong appeal in 1999, according to the De Bellas & Co. statistics.
"The buyer pool in IT Services is vast and rapidly changing," explains Kelly Southwell, a managing director at De Bellas & Co. " Three of the top five buyers in this year were not among the top five in the first nine months of last year."
"Also, we can see that the most active buyers are being more selective and making fewer acquisitions in general," adds Ms. Southwell. "The five most aggressive consolidators in the first nine months of 1998 averaged 13.2 acquisitions each, whereas the top five buyers in the first nine months of 1999 are averaging just 10.6 transactions per buyer."
The newest and most active buyers in 1999 have shown an appetite for solutions firms, according to De Bellas & Co. "The popularity of IT staff-augmentation firms, which supply technical personnel on an as needed basis, has declined," explains Ms. Southwell. "New buyers tend to be shopping for solutions providers, consulting firms that take on longer-term, multifaceted IT and Internet projects."
In the third quarter of 1999, 9 of the 71 (12.7 percent) acquired companies were IT staffing firms. A year ago, 31 of 147 acquisitions (21.1 percent) involved staffing businesses.
Among the other information released by De Bellas & Co.:
-- The top five acquirers in 1999 have been PSINet (Nasdaq: PSIX), IBS
Interactive, Inc. (Nasdaq: IBSX), Ciber, Inc. (NYSE: CBR), RCM
Technologies, Inc. (Nasdaq: RCMT) and USWeb/CKS (Nasdaq: USWB).
-- The combined liquidity (cash + available credit) of the top five
buyers increased to an estimated $1.032 billion at June 30, 1999, from $736.8 million at the close of 1998.
-- With privately owned buyers making 25 percent of the IT Services acquisitions in 1999, their prominence in the marketplace has increased considerably in the past two years.
-- In the first nine months of 1999, 20.2 percent of M&A activity in the
IT Services sector involved U.S. buyers in cross-border transactions. Last year during the same period, only 15 percent of transactions were cross-border.
De Bellas & Co. serves as an investment banking advisor exclusively to the middle market, serving the I.T. market through its IT Services Group. For more information see www.debellas-IT.com. |
