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Is Tech Ready to Go Deal-Crazy?

http://www.fool.com/investing/value/2007/10/31/techs-ready-to-go-deal-crazy.aspx

Tom Taulli
October 31, 2007

Over the past couple of months, tech companies such as SAP (NYSE: SAP  ) , McAfee (NYSE: MFE  ) , Microsoft (Nasdaq: MSFT  ) , and Oracle (Nasdaq: ORCL  ) have made some interesting headline M&A deals. Is this the start of a major trend? It may be. This is according to a tech research firm, The 451 Group.

First, let's get some background. The 451 Group reports that private equity (PE) tech deals surged 138% this year to $183.7 billion. Strategic deal making, on the other hand, plunged 31% to $212.4 billion. A strategic deal is when a company buys another firm in the same industry.

Here are the top five strategic and PE deals for 2007:

Strategic deals

Date

Parties

Amount

02-19

XM Satellite Radio / Sirius Satellite Radio

$13 billion

02-12

Vodafone Group PLC / Hutchison Essar Ltd.

$11.1 billion

10-01

Nokia Corp. / Navteq

$8.1 billion

10-07

SAP AG / Business Objects S.A.

$6.7 billion

05-18

Microsoft / aQuantive

$6.3 billion

Private equity deals

 

Date

PE Buyer(s)

Target

Amount

06-30

Ontario Teachers' Pension
Plan, Providence Equity,
Madison Dearborn

BCE

$48.5 billion

04-02

KKR

First Data Corp.

$29 billion

05-20

TPG Capital, GS Capital Partners

Alltel

$27.5 billion

06-04

Silver Lake Partners, TPG Capital

Avaya

$8.2 billion

05-17

Blackstone Group

Alliance Data Systems

$7.8 billion

However, if you take a look at the activity since August, there's been almost a complete switch. PE deals plunged from $42.3 billion to $5.1 billion while strategic deals increased 20% to $51.9 billion.

To get perspective, The 451 Group surveyed 62 respondents who represent companies that have spent $150 billion in M&A deals over the past five years.

Interestingly enough, more than 85% of the respondents said they expect to maintain or increase their M&A activity over the next 12 months. Of this group, about half plan to increase their spending and less than 10% see a decline.

Why the optimi