Tech industry M&A: More deals, lower prices

This was supposed to be the year when the technology IPO market finally returned. Indeed, storage hotshots CommVault, Isilon Systems and Riverbed Technology went public in the past six months. Security hopefuls like ArcSight, Fortinet and Sourcefire are rumored to be close behind.

Then the Chinese stock market took a dive last week, causing a worldwide cascade of among others. All of a sudden, investors are questioning the stability of the intertwined global economy. Don't be fooled by the market recoveries; everyone is on the edge of their seats.

What does this mean for the cozy little tech industry? Global economic skepticism may eventually find its way to investment bankers who react by being a lot more careful about underwriting tech IPOs. If this happens, fewer deals will get done and those that do will be a lot less speculative. Investors who were planning for a phat 2007 exit strategy will have two choices: wait or bail. My guess is that a lot will want to get out one way or another.

In essence, this series of events may make acquisitions a good deal cheaper than they were a few weeks ago. Start-ups that can't exit through the public markets will have no choice but to sell to Cisco, EMC, IBM, Microsoft, Oracle, Symantec and a host of other big companies with cash and market cap to play with.

If these trends continue, we are likely to see a big buying spree after the summer.

 

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