The IPO window is closing and the merger and acquisition deal pipeline for technology is slowing, investment bankers say.
Though two-thirds of those surveyed predicted growth in investment banking for 2008, the number who reported fewer deals in the pipeline tripled from 4 percent to 13 percent, according to a survey of about 110 senior investment bankers released Wednesday by The 451 Group.
Meanwhile, the dealmakers, drawn from 70 investment banks, said they expected about 25 tech initial public offerings to debut in 2008, about 74 percent fewer than in 2007. Bankers from larger firms—those with 50 or more professionals—were slightly less downcast, forecasting about 35 IPOs in 2008.
Overall, 70 percent of the bankers polled in December said their current pipeline had increased while 13 percent reported a decline, with the remainder reporting no change. That compares to 84 percent who reported a fatter pipeline in the 2006 survey, when only 4 percent said they were working on fewer deals.
"For three times as many to say business is down—that's incredibly significant," 451 Group analyst Brenon Daly said. "Twenty-five percent growth is where their bonus comes from. Bankers are by nature very optimistic. They're paid to be."
Still, the bankers said they expected M&A spending to decline compared with 2007 in 11 of 14 technology sectors. Increases were forecast only for hosting and infrastructure services (3 percent) and storage hardware and software (1 percent), with servers and system hardware expected to be flat.
The top sector declines in M&A are expected to come in semiconductors (12 percent) and landline communication services (9 percent). Declines also are forecast in other areas: semiconductor capital equipment (8 percent); communications and networking equipment (8 percent); Internet content and commerce (7 percent); mobile technology (6 percent); enterprise applications software (6 percent); enterprise infrastructure software (5 percent); wireless communication services (4 percent); electronic manufacturing services (4 percent), and; IT services (3 percent).
When queried about the outlook for growth in their specific financial products, investment bankers also struck a sour note, predicting less year-over-year growth in M&A (both sell-side and buy-side), IPOs, other public equity, private equity, and private debt. Public debt took the biggest licking, with a 36 percent decline in growth expectations compared with a year ago's survey.