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Survey: Tech CFOs expect increase in mergers, acquisitions for 2014

Tax complexity concerns executives, says it hampers ability to compete globally

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Most technology chief financial officers expect an increase in mergers and acquisitions in 2014, according to a new survey, led by software, cloud computing, and social media businesses.

The optimistic mood coincides with a rallying technology sector though the margin of executives predicting an increase in deals this year fell to 54 percent, compared with 70 percent last year, according to results from BDO USA LLP, a Chicago-based financial advisory and consulting firm with offices in Woodbridge.

All told, BDO said 94 percent of executives expect deals to either increase or stay the same in 2014.

Aftab Jamil, a BDO partner and leader of its technology and life science practice, said two trends have converged to create an attractive environment for deals: Cash-healthy large companies are hungry to fill portfolio gaps and smaller companies have seen their valuations rise, making buyouts attractive for their owners.

"There is a nice balance," Jamil said. "The prices aren't so high that they are prohibitive from a deal making standpoint. Venture capitalists who funded these smaller companies at early stages are seeing nice returns and sense an ability to make a deal."

The general mood favors business growth, Jamil said, at least in the near term.

"People are not in hunker-down mode,' Jamil said. "When you don't see a lot of headwinds, then you have the confidence to go out and make deals happen."

The survey polled 100 technology CFOs in the United Sates from December to January. Results also show that 67 percent of finance chiefs expect sales to increase, up from 58 percent last year.

The results come after a year of strong capital appreciation for the sector. The tech-heavy Nasdaq gained 38 percent in 2013, though it has fallen 3 percent so far in 2014.

Jamil said demand for more mobile services cloud software, data analytics and storage, and even growth in wearable technologies – like clothing or accessories that incorporate electronic technology – are driving expectations for revenue increases.

Mark Giamo, who works in BDO's Woodbridge office, said most national trends hold up well in New Jersey, especially in data storage and analytics. He said the need for companies to harness data and convert it into sensible form is scratching the surface.

"Companies are using data analytics for different reasons, for making quicker business decisions, fraud detection, target marketing," he said. "There is lot of opportunity going forward."

Tax climate was the biggest headwind reported by executives.

About 42 percent cite the U.S. tax code's complexity as a top concern, saying it hampers their ability to compete globally. Another 37 percent say high corporate tax rates are a worry, while 27 percent cited rising state tax rates as a top concern.


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