TMT Blog – June 2009

Date

After last month’s bumper crop of deals it was a bit of a case of back to earth with a bump for technology deals in the UK in June. This was, however, in stark contrast to activity levels across the pond which seemed to suggest that the worst was over and that buyers were back in the market for both mid-market and mega deals.

Forrester’s latest report on the US technology market backed up this trend. Their research suggested that the US has now seen the worst of the economic conditions and that as businesses in the States realise that the recession is not as bad as they had feared, technology spending is resuming. Forrester are still predicting that the US technology market will shrink by 5% in 2009 but that recovery will begin in Q4 and that we will see a return to growth as early as 2010. This was not quite the case for the global market however. Forrester still see worldwide technology spending declining by 11% this year.

In the UK the Financial Times highlighted this week the growing gulf in the technology market between the larger companies with the scale and funding to ride out the crisis and smaller companies like AT Communications which was this month forced to halt trading as Nimans Holdings, to whom it recently sold Rocom, put in a £3.6m claim against the business. It seems like there is no doubt that we will see more cases like ATC over the coming months as the cash that has lasted for so long finally runs out but the US trend is at least some comfort that there is light at the end of the tunnel.

Deals completed in the UK

Visual effects software developer The Foundry was acquired by its management team in a deal backed by Advent Venture Partners. The Foundry is the brains behind visual effects in a whole range of blockbusters including The Dark Knight, the Harry Potter franchise, The Curious Case of Benjamin Button, The Watchmen and Star Trek. The business was acquired by US investment firm Wyndcrest Holdings in 2007 for £5m and has doubled its revenues since then to around £6m.

Capita put its issues with IBS OpenSystems behind it this month announcing the acquisition of Carillion IT Services, the IT services captive acquired by Carillion in the Alfred McAlpine deal in February 2008 for £36m. CITS offers outsourcing, managed services and network infrastructure solutions to external clients and adds greater breadth to Capita’s IT services offering which it hopes will be a door opener for lucrative BPO contracts.

Translation software specialist SDL plc this month announced that it would acquire US business XYEnterprise Inc, a provider of XML content management and publishing solutions in an £8.9m deal. The acquisition builds on SDL’s acquisition of Trisoft in 2008 in building an end-to-end solution for creating and managing global content. The technology supplies solutions for everything from authoring to translation supply chain management, right through to the publishing of global content.

Other Deals

Softbrands, a US-based provider of ERP solutions for the manufacturing and hospitality industries worldwide announced that it has entered into an agreement to be acquired by a holding company formed by US technology-focused private equity player Golden Gate Capital and its existing investment Infor in an $80 transaction. The price represents a premium of 100% over the company’s closing price the day before the deal was announced. The weak economy had made life increasingly tough for Softbrands which has reported losses for the last three years.

Storage systems specialist NetApp announced that it would increase its cash and shares offer for Data Domain, the deduplication storage systems supplier, to $1.9bn only for rival EMC to match the bid on a cash only basis. Data Domain sells technology which is used to reduce the amount of duplicated information in data centres. In spite of the cash offer from EMC it seems that Data Domain prefers the NetApp bid believing that it will provide great value.

WebMD, an online health information provider has revived the deal for a $1.2bn merger with 80% owner HLTH Corporation in an all stock deal. Talks on the merger began during last year but were called off due to financial market turmoil and concern about saddling WebMD with the debt of HLTH. The new plan differs from last year’s agreement in not including a cash component.