The number of merger and acquisition deals in Canada’s software and computer services sector is continuing to decline, says a new report.
The survey, released last week by the Canadian Advanced Technology Alliance (CATA) shows the number of deals in 2002 was down three per cent from 2001, from 60 to 57; and their value was off 15 per cent, from $2 billion to $1.7 billion.
“The low level of merger activity continues to contribute to the industry’s capital problems,” said CATA spokesman David Paterson.
“Venture capitalists cannot exit their investments by the IPO route . . . the weak M&A market shuts the door on their secondary exit strategy.”
He adds startups are not being funded, and several companies have gone under when they could not raise another round of financing.
It’s expected that as markets pick up, companies with good cash positions will be bargain hunting, says CATA, although it doesn’t expect the market to rebound any time soon to levels seen in 2000 where there were 105 deals worth $11.4 billion.
Canadian companies spent $941 million on their acquisitions in 2002, buying 19 other Canadian businesses for $429 million, and 19 foreign ones for $512 million.
Foreign companies bought 23 Canadian firms for $746 million.
