Mergers to shrink IT world

The information technology industry is in for a rush of mergers and acquisitions in 1997, with Net media and content companies leading the way.

A new survey released today by Broadview Associates estimates that 72 percent of IT companies in North America are likely to pursue a merger or acquisition in the next 12 months. That's an increase of eight percent over last year's survey.

The survey was based on responses from 175 companies.

Broadview, which advises companies on mergers and acquisitions, also found that 89 percent of media and content services companies--the companies that are most active on the Internet-- are planning to merge with somebody else in 1997. Only 59 percent of companies in the more traditional market for IT--supporting products and services--are planning to merge.

Charlie Federman, Broadview chairman, said that next year's deals between media companies demonstrate a distinct wave or business trend driven by the ever-increasing need for unique Internet content.

Federman has observed two other such waves over the last couple of years, the first marked by telecommunications companies acquiring regional Internet service providers to handle the "pipes" or connections to the Internet; the second matching up software tools developers who wanted to set standards for Net development.

While the most activity will take place in this narrow spectrum of Net-related media companies, all the other IT sectors are also expected to continue looking for economies of scale by hooking up with other firms that have similar business plans.

Increasing shareholder value, pursuing market leadership, and increasing revenue growth are the three most important reasons for pursuing merger deals, according to the survey. A third of the companies surveyed said a favorable economic environment will be the driving force behind a merger in the next 12 months.

Broadview expects to see fewer acquisitions. Companies' primary goal is to diversify their product holdings.