Per Roman and Manish Madhvani, co-founders of GP Bullhound, kicked off the White Bull conference here in Sitges and said things are looking rosy on the merger and acquisition (M&A) front.
Per Roman said: "There's some silver lining for us in Europe, with the exception of the PIGS countries. Northern Europe is looking increasingly stable and we can see a huge GDP growth in the second quarter with a much stronger recovery in Germany and Sweden. Long term interest rates reflect a lot of uncertainty. One of the reasons why there is so much uncertainty is there's a real concern levels that debt is so high.
He said: "The good news we're seeing factored into prices and the technology sector is outperforming. We're now really a hot sector. I look for the day when gold stops rising. Every 10 years our industry destroys itself." The new kids on the block are Apple, ARM and Google, while Nokia, Intel and Microsoft are flat. "The best bet now is shorting the top three and longing the bottom three. The unloved are truly unloved."
Some IPOs have been pulled, said Roman. "The reality is it's still quite an uncertain IPO market." Europe needs the IPO market to come back. There's a noticeable pickup in M&A activity.
Manish Madhvani said cash reserves are driving M&A activity. There's over three trillion stored up. Apple has over $40 billion, Google has been acquiring a company or two a month. "The good news for investors is that the cash piles are being transferred to cash offers." The other big trend is that more foreign companies are buying into the European market. The US is getting back to 2007 levels. If a US or Asian buyer bids, it increases the price range significantly.
Asian companies now account for three percent of foreign buyers and a lot of Asian companies are bidding. Most of the activity is happening at the digital content level - ecommerce accounts for 53 percent of M&A activity. Mobile accounts for nine percent, gaming for 26 percent. Everyone is trying to re-invent themselves. The web has gone from being a search function to a social function. Even Google is struggling in that area. Ecommerce is fuelling the M&A market.
Madhvani thinks that mobile will overtake the desktop by 2014 - it's not just the gorillas but tier two and three companies are also mapping their mobile strategies. The shift to cloud computing means people are diversifying their revenue streams. The traditional software companies are beefing up their strategies.