I attended a breakfast seminar in the City yesterday morning to hear a review of the technology, media and telecoms M&A market, held by legal firm Field Fisher Waterhouse and Mantra PR-client Cobalt Corporate Finance.
Economist George King from Alliance Bernstein presented an upbeat view of the markets. He said that we’re still seeing more negative data than positive but believed that fundamentals are improving. He did, however, warn that we’re not at the bottom of the market yet.
King told the audience that investors had two possible responses: walk away; or lean into the market and take advantage of cheap asset prices.
I’m making my own personal bid to take advantage of the upturn with my £1k FTSE 100 confidence project. But here’s the issue: cash (or debt) is in short supply and so any investment at this stage in the market must be made from reserves.
There are lots of comparisons to be made between personal finance in a downturn and business investment. Market uncertainly and piss poor sentiment means that you want to hold onto your cash if you’re fortunate to have built up savings or reserves and aren’t willing to risk investing in a market that may have further to fall.
M&A in the short term has stalled. But it’s not all doom and gloom. IS Research’s Ian Spence, techMARK analyst of the year, cited plenty of opportunities for M&A, listing netbooks, IPTV and femtocell.
Cobalt’s Chris Williams added cleantech to the list while Field Fisher Waterhouse’s Neil Fisher said that the spectrum auction sales at the end of the year would create opportunity in the longer term.
Williams said that while there is a reduction in M&A activity, there will always be some.
“Unique IP, whether content or technology, will always be attractive to big corporations and I expect to see those deals continue largely unaffected by the market.
“We will inevitably see some young businesses run out of funding and the collapse of some mature businesses with weak propositions – the recession just speeds up the inevitable (just look at the collapse of businesses like Woolworths in retail)…….but that will leave the survivors in a stronger position for the recovery.”
And the prognosis for M&A in the TMT sectors? I’ll leave the last word to Williams:
“Lack of cash and debt will hold back the recovery in M&A but even then I suspect that in the second half of 2009 prices will stabilise and we could start to see defensive consolidation of good businesses in non-cash deals.”
