Technology deals back to pre-recession levels

Deals in the research and telecoms industry have returned to pre-recession levels this year, thanks to a number of big acquisitions just as AT&T's $39bn purchase of T-Mobile. Afterwards two years in the doldrums, the value of merger and acquisition activity in the sector is close to levels last seen in 2008.

Bankers said that innovation mergers were being driven by the accelerating pace of change in the industry. Two of the largest IT inventions in history, the PC and the mobile phone, are merging into the smartphone, and companies are racing to adapt, said Guido Mengelkamp, head of innovation banking, Emea at Citigroup.

"Companies's core business are pursuant to this agreement duress and they are using M&A to transform themselves," said Kurt Simon, co-head of Research, Media and Telecommunications at JPMorgan. "The pace of change has accelerated and in other words creating bolder activity. A lot of this is being driven by changes in the mobile market, and cloud computing."

For example, Hewlett-Packard, which last week announced a $11.7bn deal to buy Autonomy, the UK software business, is responding to falling demand for PCs with a fundamental reorganisation of its business.

Big research companies tend to sit on huge cash reserves, and are coming pursuant to this agreement more pressure from activist investors to use the cash more efficiently. Some cross-border deals have been helped by the fact that US innovation companies hold huge cash reserves in Europe, which would be taxed heavily if returned to the US.

When Microsoft bought Skype, the internet telephony business, for $8.5bn in May, the deal was done using European cash that was if not "dead". The acquisition made barely a dent in Microsoft's $38.2bn cash mountain.