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By Sylvia Carr, 22 July 2005 14:25

NEWS The pace of tech acquisitions in Europe is continuing its upward trend with a five-year high on the number and value of deals, according to new research.

During the first half of 2005, 1,413 acquisitions took place in Europe for a total value of $107bn, says investment bank Regent Associates. The number of deals rose 26 per cent from the same period last year, and the value is around double that of transactions during the first half of 2004 and 2003.

This is the highest level of mergers and acquisitions (M&A) activity since early 2000, the height of the dot-com boom, the research shows.

Peter Rowell, chairman at Regent Associates, told silicon.com the fact companies cut costs after the boom now gives them the funds to buy other companies. "They cut the costs [after the boom] so they're generating good profits - and generating quite a bit of cash and then using that cash for acquisitions," he said.

Venture capitalists, too, have had opportunity to exit some of their investments and now are "sitting on a lot of cash and they're looking for places to invest that," Rowell added.

But the age of mega-deals over $10bn is no more and instead midsize deals rule the day. In the first half of 2005, Europe saw 23 deals in the $1bn to $10bn range, compared with 17 in all of 2004 and 14 in 2003.

Computer services was the sector with the highest amount of M&A activity (416 deals) while content and electronic media had the biggest increase since last year of 47 per cent.

Regent Associates noted a particular rise in deals involving system integrators, professional services and vertical solution suppliers.

Rowell said this is a sign the IT market is in true recovery from the downturn earlier this decade. "One thing we always see when there's a downturn in the market is, as we emerge most of the IT investment is in rebuilding infrastructure - replacing broken laptops, getting a slightly better operating system, basic things," he said. "Once that's accomplished, users of technology start looking at applications to make them more competitive in the market."

The UK and Ireland led the way as the region with the highest number of deals so far this year (346), while the Nordic region of Denmark, Finland, Norway and Sweden topped the charts for growth spurts, accounting for 20 per cent of the M&A activity compared to 10 per cent three years ago.