Will tech deals impact your decision-making? As record-setting tech company M & A continues, the resulting consolidation of IT companies is sure to impact CFO decision-making. Will it help or hinder?

• Author: Miller, Tim
• Position: DEALS - Mergers and acquisitions

Technology M & A has soared in recent years as a result of consolidation within hardware, software and telecommunications markets and aggressive spending by vendors to bolt on new technologies. IT and finance executives at end-user companies may well feel the downstream impact of these deals in months and years to come as M & A thins the ranks of vendors they buy from. They may also deem the consolidation helpful in accelerating the introduction of new products and services that save them money and that enhance the effectiveness of technology.

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As we charge through 2007, the pace is quickening. From 2002 to the present, acquirers around the globe have paid more than $1.2 trillion to buy nearly 14,000 technology companies. M & A spending has accelerated in recent years, with $412 billion spent in 2006; that was nearly twice the amount spent in 2004--and more than was spent, collectively, from 2002-2004.

Activity continues apace so far in 2007, with transaction volume and dollars putting this year on track to be the fourth straight record year of post-bubble M & A. Through April 30, acquirers have announced 1,277 deals worth some $157 billion. The level of spending--excluding AT & T Inc.'s mammoth $86 billion bid for Bell-South Corp. in the first quarter of 2006--is tracking about 60 percent higher than the same January-to-April period last year, with the number of announced deals holding about even with last years' levels. That's according to the 451 M & A KnowledgeBase, the technology-specific transactions database provided by technology industry analyst firm The 451 Group (see chart on page 32).

Publicly traded companies saw a dramatic increase in acquisition attention in the first quarter of 2007 from both strategic and financial acquirers. Acquirers took over 78 public companies in the first quarter, nearly double the 40 they acquired in the same period last year. Thanks in large part to the increased focus on public targets, the number of very large deals also rose. In the first quarter of 2007, acquirers inked 20 deals worth at least $1 billion, twice the number announced in the first quarter of 2006.

In this merger-frenzy environment, just prior to press time came reports of talks of a potential deal between giants Microsoft Corp. and Yahoo! Inc.--the kind of merger that would send the numbers through the roof.

Cash is King

In a sign of the times, even as the transactions have gotten pricier and more plentiful, cash continues to be the currency of...