More than 300 shareholders and executives at Irish technology companies have become millionaires over the past 15 years from selling their businesses, according to the author of a report on mergers and acquisitions in the IT sector.
The survey by Dublin-based corporate advisory group Pegasus Capital shows some 215 Irish technology companies have been sold since 2000 for a combined €7.9 billion.
"There would be at least one millionaire arising from each deal and it's safe to assume that the number [from all the transactions combined] would be 300-plus," Pegasus director Dónal O'Connell told The Irish Times.
According to Pegasus, 44 per cent of all the deals, by value, have been completed in the past five years.
This reflects the long recovery within the tech sector following the dotcom bubble in March 2000. The Nasdaq index in New York is only now back at its peak from that era.
Pegasus’s analysis shows there were some 200 buyers of the 215 companies.
Just shy of 30 deals were completed in 2014, the busiest 12-month period for M&A activity since 2000. Five deals have been completed in the year to date, with by far the biggest being the €115 million sale of Realex Payments to US giant Global Payments.
Realex founder and chief executive Colm Lyon and his wife Niamh reportedly netted €90 million from the deal.
Pegasus’s analysis shows that the average exit since 2000 has been €42 million, rising to €62 million over the past four years. In the past five years there have been 11 deals valued at $100 million or more.
Sage, the UK enterprise software group, has completed the most deals involving Irish tech companies over the period, with seven transactions.
Calyx is next with five deals, followed by IBM (including Curam Software) with three, and US multinationals Intel (acquired Aepona and Havok), Sunguard and Cendant with two each.
The $100 million-plus deals logged by Pegasus include the IPOs of Parthus (led by Brian Long), Skillsoft (headed by Bill McCabe) and Riverdeep (chief executive Barry O’Callaghan), the sale of Jerry Kennelly’s Stockbyte to Getty Images, and Norkom’s acquisition by BAE Systems plc.
More recent transactions include the sale of wifi provider Bitbuzz to UPC Ireland, BC Partners buying CarTrawler and Red Hat’s €63.5 million takeover of FeedHenry.
Pegasus found that 55 per cent of transactions were conducted on a one-to-one or limited auction (fewer than three bidders) basis.
“In a typical disposal process, there is a reasonable degree of discussions with six potential acquirers . . . with two to three putting forward bids,” the survey added.
It found that 18 to 21 months is the typical earn-out period involved for owners or executives in M&A deals in the tech sector, although it can go to 36 months.
An 18-month warranty timeframe is also typical, although it can last up to 30 months. The maximum warranty claim can be up to 60 per cent of the consideration paid, but is typically around 30 per cent.
Mr O’Connell said M&A activity in the tech sector is accelerating as a large number of venture capital funds enter the second half of their life cycles, a period when they typically seek exits from their investments.
“That would suggest more activity in the next 12 to 18 months,” he said, adding that 20-plus could be completed this year.