Is Private Equity Developing A Crush On Tech?

from the just-dating dept

The private equity industry's appetite for deals has been undeniably voracious of late, but for the most part, the major firms have steered clear of the tech industry. There have been a few scattered deals, but some are sensing that the pace may be quickening as today brings news of several more possible deals. As mentioned earlier, Palm has agreed to a sale, which is something that's been rumored for a couple of weeks now. Also, software maker Cadence is also said to be in serious talks about selling out. If these deals really do mark the beginning of a trend, it's not totally clear why things are happening now. Obviously the outsize returns that PE firms have been delivering in recent years has prompted a flood of cash into their coffers, cash that must be invested. It's possible that with the soaring stock market and the vast number of deals that have already happened, tech is benefiting simply by virtue of being heretofore untouched. It's also true that in recent years, many established tech firms have begun to resemble traditional companies in terms of their finances. Microsoft, of course, actually distributes its cash to shareholders, while Oracle even started floating bonds, a real rarity in an industry that typically carries little debt. It's too early to say for certain if this will turn into a sustained trend, but it would seem that the conditions are in place (on both the supply and demand side) for more deals to happen. What's more, as a few of these deals do work out, private equity specialists will start to get more comfortable with the industry and develop a better nose for opportunities, which could cause things to snowball.


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