The Canadian Advanced Technology Alliance’s annual survey of mergers and acquisitions activity in the Canadian software and computer services industry shows a continued decline in activity. The number of deals in 2002 was down three per cent, from 60 to 57, and their value was off 15 per cent, from
$2 billion to $1.7 billion. Two big deals right at the end of the year, Cognos’ $248 million acquisition of Adaytum and CGI’s $329 million offer for Cognicase, prevented the numbers from being worse. Still, the industry did better than Canada as a whole. Dealogic reported that the number of M&A deals in Canada fell seven per cent last year, and their value was down 25 per cent.
David Paterson, CATAAlliance national director said:
“”The low level of merger activity continues to contribute to the industry’s capital problems. Venture capitalists cannot exit their investments by the IPO route. The weak M&A market shuts the door on their secondary exit strategy. The result shows in the sharply lower level of venture capital activity in Canada last year. Many startups are not being funded, and several companies have gone under when they could not raise another round of financing.””
Canadian companies spent $941 million on their acquisitions. They bought 19 other Canadian businesses for $429 million, and 19 foreign ones for $512 million. Foreign companies bought 23 Canadian ones for $746 million.
Activity should pick up in 2003. As the economy continues to recover and export markets pick up, companies with good cash positions will be bargain hunting. It will be a long time till the market gets back to the 2000 level of 105 deals worth $11.4 billion.
MERGERS AND ACQUISITIONS Fast Facts
Only 19 mergers took place in 2002 between Canadian IT firms and foreign companies.
Only 19 mergers took place in 2002 between Canadian IT firms and other Canadian IT firms.
Meanwhile, 23 foreign companies acquired Canadian IT companies in 2002.</