2007: Time to act

No doubt about it: this is a very good time to sell an information company. A rising tide of private equity capital, a renewed appetite for acquisitions among strategic information companies, and favorable prospects for corporate profits and economic growth paint a pretty compelling picture.

But those are only the obvious characteristics of the current M&A environment. What’s really driving the record pace of deals in the information technology and content space is innovation. Never in recent memory have we seen so many good ideas come to such tangible fruition by such well seasoned, disciplined companies.

What differentiates this surge in M&A from past booms is, in a word, reality. The giddiness of the last boom has settled into a sober assessment of what’s real, what works, and what it’s worth. Happily, there are literally thousands of companies, large and small, new and established, finding ways to turn good ideas into real products and services that actually solve problems, satisfy users and generate profits.

Outlook: favorable

The current M&A market is as strong as we’ve ever seen it, with little on the horizon to cloud our outlook in the near future. Information companies are presently doing a good job finding ways to make money and better deploy their assets.

Private equity in driver’s seat

Investor-backed funds kick-started the M&A market rebound in 2004 and haven’t looked back. Their pedal-to-the-metal pace will continue through 2007, fueled by plenty of high-octane cash from deep pockets both foreign and domestic.

Up next: strategic players

Having missed out on a lot of good deals while watching the PE funds amass strategic-looking portfolios, the global information giants are back in the hunt. But with fund managers calculating break-up value, some of those strategic hunters may become prey themselves. Watch for a spate of public companies going private in 2007.

Buyers become sellers

As their three- to five-year time horizons approach, many of the businesses acquired by private equity funds will go on the block, giving strategics who missed out the first time another bite at the apple — only this time the apple may be a little leaner and more than a little pricier.

Dem’s the rates

Capital gains tax rates are at historic lows, and won’t go anywhere before the 2008 election. Should the Congress remain in Democratic hands, and the White House go that way, a cap gains hike will be on the table. Private sellers looking to preserve a few points of value may rush to market in advance of any tax hike, real or threatened.