The great consolidation

In the year to September 2008 there were 1,391 acquisitions of technology companies reported in the media Apollo researches. The IT industry has undergone another period of consolidation, one that has seen established company names disappear from the PR radar.

This has had major implications for the PR agencies that serve the IT industry. What happened to these companies after acquisition varied but in most cases the marketing and PR functions were absorbed into the parent meaning that two buying points were reduced to one.

But, similarly, it has also fuelled the movement of people between companies. Our calculations suggest the average time a marketing or PR manager spends with a company is now 21 months. This also has implications for the PR agencies because new appointments often want to review the existing agency arrangements.

Some of the deals taking place are small and don’t really affect the agencies because the companies involved are not particularly active PR players. However, in the last 12 months some very large acquisitions have taken place. These are just some of the companies that have been bought for at least $1 billion in the last 12 months: BEA, BladeLogic, Business Objects, Cognos, DoubleClick, EDS, EqualLogic, FAST, Foundry Networks, MySQL, Navteq and Tektronix.

Whilst some tech PR agencies have benefited from these acquisitions with extra spend from existing clients, others have certainly felt the pinch. It shows the benefits of having clients likely to be doing the consolidating, rather than the other way round. It also underlines the need to spot the companies that grow to take the place of the companies taken over.

There has been some temporary respite as the credit crunch has hit and the number of acquisitions has declined (September 2008 was 12 per cent down on September 2007 and 15 per cent down on August 2008). But our expectation is that the appetite for consolidation remains and that the current situation is the result of a waiting game: buyers are waiting for the value of their targets to fall and/or for acquisition funds to be made available. When the time is right we expect acquisition activity to continue at the rate that we have seen over the last couple of years.

The table below shows the number of technology company acquisitions since September 2007.