IT Services M&A activity Surged 24% in 2006, Driven by PE and India

While the global M&A activity set for a record $4 trillion value in 2006, the IT services sector also enjoyed bumper year in M&A activity with 319 deals, a jump of 24% over 2005, according to data tracked by Computer Business Review.

While much of the M&A activity in 2006 centered on India, the biggest deal of 2006 was the acquisition of call center services provider West Corp for $4.1 billion by an investment group led by private equity firms Thomas H Lee Partners and Quadrangle Group. 

Other highlights of IT Services M&A according to CBR include: 

  • The average size of the top 20 takeovers in 2006 was $795 million, compared to an average of $538 million in 2005 and $550 million in 2004.
  • Four of 2006's 10 biggest M&As involved private equity firms: One Equity Partners's $1.3 billion acquisition of business process outsourcing provider NCO Group; Kohlberg Kravis' bought Flextronics Software Systems for approximately $900 million; Veritas Capital acquired Pearson Government Solutions in a $600 million deal.
  • Capgemini agreed a pay $1.3 billion for Kanbay International, a US company boasting over 5,000 staff spread across three Indian development centers. 
  • EDS gained a majority stake in Mphasis. 
  • India's I-Flex, Patni, NIIT Technologies, L&T Infotech and Helios and Matheson all announced takeovers in 2006.

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