Here is a good commentary from Seattle Times.
“Don’t be surprised if you see a few limos driving slowly down Elliott Avenue, doing a little window shopping.
Big tech companies are expected to be on the prowl again for acquisitions this year, and the Elliott corridor along Seattle’s waterfront is lined with prime targets.
Actually, companies around the region could be acquired in the coming year as bigger tech companies feel comfortable that the recovery has taken hold and begin spending the cash they’ve been accumulating.
“Now that the equity market is back up they’re jumping in and catching up,” said Nat Burgess, president of Corum Group, a Bothell firm that advises companies on mergers and acquisitions. “If you look out for the next six to nine months, it’s going to be fantastic in terms of deal volumes, in terms of valuations.”
Venture capitalist Matt McIlwain at Madrona Venture Group is expecting deals to roll over the next year or two.
The biggest tech companies, such as Microsoft, Cisco Systems and Google, did a remarkable job managing costs through the downturn and may now be realizing that they “underinvested in innovation,” he said.
“To get growth and innovation, next-generation products, they’re going to have to make some acquisitions,” he said.
Interest rates are still low and the seven biggest tech companies together have $200 billion in cash and could generate $75 billion more this year, he said.
“That sets the stage for at least a 12-to-18-month cycle of acquisitions,” McIlwain said.
Deals may be good for investors, but there’s also a chance the acquiring companies will cut employees or even relocate the businesses.
Buyouts would also continue the Seattle syndrome that leaves the region with an uneven mix of tech companies — a few giants and lots of smaller ones, but not much in between. Companies with promising technologies tend to be sold before they get too big, creating a void in the middle.
But that won’t stop the pinstriped buyers from cruising Elliott with trunks full of cash.
F5 dominates the market for application delivery systems, creating what it calls “strategic points of control” in corporate networks. It’s expecting sales of about $200 million this quarter.
Rumors about F5 being sold have come and gone for years. Some analysts said the big opportunity passed in November when likely buyer Hewlett-Packard bought 3Com instead.
One of those analysts is Jeff Evenson, a Bremerton native at Bernstein Research in New York.
Evenson said F5 would be a strategic fit with a number of companies, but he thinks it could be a challenge to get a deal done.
“The most obvious buyers have an issue that I think is almost insurmountable for them,” he said.
Cisco would be a natural, he said, but it might have trouble getting antitrust approval for a deal if regulators focused on the niche F5 serves.
Within that segment of the network-switching market, the combination of F5 and Cisco would control 80 percent of the market.”
Read the full article here.
