Generation Equity Advisors Announced the Release of Its Q3 2011 - IT Services M&A Report

Los Angeles, CA, October 03, 2011 --(PR.com)-- Generation Equity Advisors announced the release of its quarterly report on the latest global IT services industry M&A transactions. Generation Equity Advisors is a Los Angeles-based investment banking firm focused exclusively on M&A transactions in the Technology and Digital Media sectors.

The following summarizes the report:

Q3 2011 – M&A Update

Mergers and acquisitions slowed significantly in Q3 2011, hindered by economic uncertainty that stifled the confidence and growth projections of corporate executives.

The few companies eager to seize on opportunities are bumping up against reluctant lenders.

High-yield debt that serial acquirers in the private equity world rely on for deal-making has become harder to find, in part because troubled European banks are bowing out of financing deals. Private-equity backed M&A, which typically relies heavily on high-yield financing, is down 22 percent from Q2 2011.

Announced M&A deals for the volatile Q3 will have declined about 23% from the previous three months, according to Thomson Reuters Deals Intelligence, as stock market fluctuations, the European debt crisis and the U.S. budget stalemate put many planned deals on hold.

The $16.5 billion purchase of Goodrich Corp that United Technologies unveiled last week was on track for an August announcement before wild market fluctuations side tracked deal talks, a source familiar with the deal said.

The good news is that well-capitalized companies such as United Technologies, Google, IBM, Dell, Xerox and Oracle can get financing when they want it.

Once economic and geopolitical clouds clear, deal books will circulate again. Regardless, smaller M&A transactions are getting done and are expected to remain strong for the next few quarters.

The global deal count for the first nine months is up 20 percent over last year, mostly due to strength in the first half of the year, the data shows. Deals in Q3, through September 22, fell to $539 billion from $699 billion in the previous quarter (Q2 2011), according to Deals Intelligence.

Europe and Asia Pacific have been hit particularly hard, with deals in each region falling 34% from the previous quarter.

Financing Woes

The lack of financing for deals involving non-investment-grade companies is a significant cause of the drag. A number of deals have gone sideways, but are likely to be resurrected when the markets rebound.

Investment-grade companies have had more luck but even they have bumped up against tighter lending as banks fret over the effects of the European debt crisis.

Big Deals

One bright spot for M&A is that the size of deals announced in the quarter increased to an average of $155.9 million, the second-highest level in the last three years, according to Thomson Reuters data.

Large companies with strong reserves of cash will continue to be aggressive, in spite of the current uncertainty.

After starting with a bang, deal volume for 2011 is on track to end only 5 to 10 percent higher than last year, according to research estimates. That points to a dreadful fourth quarter since deal value is currently about 20 percent up from last year.

The themes that drove healthier deal making last year -- strong cash balances and available financing -- are still present.

Uncertainty about the global economy is the swing factor that could impact the next few quarters.

IT Services M&A Transaction Highlights and Multiples

M&A transaction multiples for the latest quarter (Q3 2011) in the IT services sector averaged 0.7x transaction value-to-trailing twelve months revenue (TTM), with a low of 0.1x and a high of 1.8x.

Highlights and most active acquirers in Q3 2011 include:

* Fusionstorm filed to go public in August and also acquired two companies, Global Technology Resources and Red River Computer Co.
* All Covered (Konica Minolta Business Solutions) acquired two companies, Vertical IT Solutions and LAN Associates.
* CSC acquired two companies, AppLabs Technologies and Maricom Systems.
* Cognizant Technology Solutions acquired two companies, Zaffera and CoreLogic Global Services.
* Affiliated Computer Services (Xerox) acquired Italy-based BPO and call center firm XL World.

You can download the complete report (free) at TechMediaMergers.com or GenerationEquityAdvisors.com

Generation Equity Advisors, LLC is a Los Angeles-based investment banking firm focused exclusively on the Software, IT Services and Digital Media sectors globally.

###