Webmergers.com released its February Internet Mergers & Acquisitions report today confirming that while the tech industry is on the mend, M&A spending has declined and in some cases plateaued.
Webmergers is a San Francisco, Calif.-based research and services firm for buyers and sellers of Internet technology properties that pinpoints emerging trends and focuses on who’s buying, what they’re buying, and how much they’re paying for Internet destinations, infrastructure companies, access providers, and consulting firms.
According to the report, despite a major slowdown in multi-billion dollar deals, there are signs of increasing vitality in the Internet sector as companies continue to consolidate, lower overhead, and non-Internet buyers adapt product lines to Internet technology at bargain prices.
Based on statistics from 2001, overall M&A spending has declined by half compared to this time last year.
“Declining valuations and the inherently “niche” nature of many Internet destinations are largely responsible for shifting much of the recent M&A action into the middle market,” stated Webmergers.
The number of asset sales for bankrupt or distressed companies fell to 20 from 31 last year as the dotcom fallout slowed. Buyers spent around $210 million, compared with what Webmergers approximates to be more than a quarter of a billion in spending a year ago when companies were closing in greater numbers.
Buyers of Internet or technology companies spent $2 billion to acquire 103 Internet properties in February alone, which is considered a relatively flat market, with the preceding months of January and December coming in at $2.1 billion and $2.2 billion.
A year ago February, M&A spending was in the 4 billion range.
Leading the M&A charge is the infrastructure deal, which has nearly doubled since a year ago, although total spending has declined due to asset sales and depressed valuations.
According to the report, infrastructure buyers spent $1.7 billion to acquire 59 companies in February 2002, compared $2.6 billion last year to purchase only 30 properties.
Popular infrastructure categories on the rise include basic tools and middleware for enabling e-business, content management, customer relationship management services, and semiconductors.
On the other side of the fence, M&A activity within the Internet destination category was weak, cashing in at only $140 million on 19 deals in the month. This marks an 85 percent decline from a year ago.
“Continued weakness in online advertising and only scattered successes among online retailers contribute to apathy among buyers of Web sites,” stated the report.
Activity for Internet access providers and Internet consulting firms was fairly moderate, and foreign buyers have come to a virtual standstill, according to Webmergers.
Notable deals in the month of February, mainly within the infrastructure category, include storage systems company Legato Systems , which dolled out $403 million to acquire data storage company OTG Software.
Another notable deal involved Adobe Systems and its $72 million acquisition of Canada-based Accelio Corp. in an effort to expand its document management capabilities.
E-commerce company InPhonic, Inc., a provider of wireless services, stepped up to the plate with a $20 million acquisition of Simplexity, Inc., a marketer of wireless products and services.
Webmergers produces a number of reports over the course of the year tracking Internet M&A activity in the tech sector, most notably a 200-page bi-annual overview of M&A activity that can be ordered through the Webmergers’ site.
