The important role of technology for deal making in 2011

Latest research from KPMG in its Global M&A Predictor expects global net debt to fall by 10%in 2011.  It also predicts that the greatest appetite for M&A is the telecoms sector where forward price earnings ratios are up by 2% - the only sector whose P/E is in positive growth territory. 

Laurence Whitehead, Corporate Finance Principal at MacIntyre Hudson comments: "Technological developments could prove to be one of the few exceptions in the short term to the issues being faced in many industry sectors, where demand remains sluggish at best.  Innovative technology which leads us into the future is a key growth area.  Technology companies in the mobile data space and 'the cloud' are particularly well placed to deliver strong growth.  A number of other emerging technologies are providing a stimulus to the M&A market as companies seek to share intellectual property and access technology-hungry environments."

In the UK forecast net debt compared to EBITDA is expected to tumble by 30% during 2011.  There is expected to be extensive deleveraging, with net debt forecast to fall by over 20%.   This could lead to an improvement in M&A capacity.  However, forward P/E ratios show that the picture is less rosy, with ratios nearly 15% lower for UK companies over the past year. 

Laurence adds: "The UK M&A market is giving out mixed signals at the moment: on the one hand, companies have been substantially reducing their debt levels as a percentage of their profit, and this is expected to continue over the next year; on the other hand, reduced P/E ratios indicate a lack of confidence in the market."

It would therefore appear that company owners and senior managers wanting to get out of the low growth cycle will have to communicate effectively with their financial backers and work even harder than previously to persuade such backers to get them on side.

Contact us

To find out how our award-winning corporate finance team can help you to find the right funding for your technology business, contact us now for a no-obligation initial discussion or meeting:

T: 01908 662 255
E: mhcfinfo@mhllp.co.uk
or alternatively send us an enquiry online.