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Cloud computing companies to boost M&A in 2011

The forecasts for mergers and acquisitions next year are good, with cloud technologies set to bring in the money, claims Deloitte.

Cloud computing

Mergers and acquisitions (M&A) are set to increase in 2011, with cloud computing companies selling for the highest price.

This was the finding of Deloitte's bi-annual survey into UK technology companies, which claimed to have found a rise in optimism in the market compared to six months ago.

This year saw a number of high profile acquisitions, with bidding wars sending prices through the roof. Deloitte claimed a more competitive auction market next year would keep prices high, although would sometimes lead to bidders holding out.

The key for UK M&A, however, will fall with the type of technology on offer and here cloud computing companies are set to shine.

Conor Cahill, technology corporate finance partner at Deloitte, said: "Valuations are expected to increase in the next 12 months as auctions become more competitive."

"The favoured sectors that will attract a premium are those that support and embrace cloud based solutions, while diagnostic software is particularly important to understand changes in customer behaviour."

He added: "Organisations will look to address the increased interest in cloud related technologies through their M&A strategy in order to accelerate capability in this area."

The UK will not be snapping up its own companies though and there will be a certain reliance on overseas giants coming in to pay up for new technologies.

The report claimed the US was set to be the biggest buyer of UK tech companies, with 90 per cent of those surveyed seeing them as the dominant acquisition force.

However, there was also the belief interest from Indian and Chinese companies were set to increase over the next year.

Cahill concluded: "It is encouraging that M&A optimism has increased, even if some of the significant premiums paid on a number of well-publicised deals may lead to some prospective acquirers deciding to sit things out."

"Cash rich corporate acquirers continue to consolidate the market with an accelerated migration towards cloud related technologies."

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