2004 Proves to Be Year of Recovery for the IT Services M&A Market, Reports The McFaddin/Metis Group.

HOUSTON -- The McFaddin/Metis Group announced today that in calendar year 2004 it noted 267 transactions in the broader information technology (IT) services sector. This represents an increase of 70% over 2003. In the fourth quarter of 2004, there were 60 transactions, an increase of 62% over the fourth quarter of 2003. The data compiled for this study covers merger and acquisition activity and trends involving U.S.-based sellers and acquirers who provide IT staffing, solutions and outsourcing services.

The government sector was, yet again, the most active with a total of 20 transactions and a percentage to total deal flow of 33%. Most notable during the quarter were the acquisitions of Resource Consultants by the British buyer Serco Group plc and the acquisition of VistaRMS by kforce (Nasdaq:KFRC). For calendar 2004, this sector generated approximately 28% of the total annual deal flow.

There was additional activity in the Managed Service Provider/Application Service Provider space with four transactions, or approximately 7% of the quarter's total deal flow. Most noteworthy during the quarter was the acquisition of Inflow, a company that had itself been an acquirer, by Sungard Data Systems (NYSE:SDS). In all of 2004, this sector produced close to 10% of the total annual deal flow.

There was also continued consolidation during the quarter in the Microsoft services provider space with five transactions, or 8% of the quarter's aggregate deal flow. Allin Corporation (OTCBB:ALLN) was the most active with some small, local acquisitions in the Microsoft Business Solutions space. During all of 2004, this area posted 7.5% of the total annual deal activity.

The most active buyers during the year were, not surprisingly, in the government arena and included BAE Systems with four acquisitions, Dyntek (Nasdaq:DYTK) and SAIC. Outside the government sector, TECTURA Corporation was the most active with five transactions in the Microsoft space followed by Perficient, Inc. (Nasdaq:PRFT) with three transactions across the IT solutions space.

Melanie McFaddin, President of The McFaddin/Metis Group and an active participant in the IT services M&A market for ten years, commented, "I believe the M&A market for IT services companies will continue to demonstrate strong activity in 2005. Buyers need to put their resources to work and for some there is little choice between organic and acquisitive growth." She further commented, "While the IT services environment is still transitioning, most of the surviving services providers have learned to adapt to these changes and their business models, and associated financials, demonstrate this hard work and commitment."

The McFaddin/Metis Group is a mergers and acquisitions advisory firm focused on companies whose value is derived from professional-level human capital. Clients include companies who provide management consulting, information technology staffing, solutions and consulting, professional staffing and human resources consulting.