Activity in the First Quarter Bodes Well for IT Services M&A in 2005, Reports The McFaddin/Metis Group.

HOUSTON -- The McFaddin/Metis Group announced today that in the first quarter of 2005 it noted 63 transactions in the broader information technology (IT) services sector. This activity was 3.3% greater than was noted in the first quarter of 2004 and 5% greater than the fourth quarter of 2004. The data compiled for this study covers merger and acquisition (M&A) activity and trends involving U.S.-based sellers and acquirers who provide IT staffing, solutions and outsourcing services.

The government sector continued its consolidation and was once again the most active sector with a total of 22 transactions and a percentage to total deal flow of 35%. Of note during the quarter were the acquisitions of The Sytex Group by Lockheed Martin (NYSE:LMT) and the acquisition of NetSec, a managed services provider focused on the provision of security services to the government space, by MCI (Nasdaq:MCIP).

There was also continued consolidation during the quarter in the Microsoft services provider space with seven transactions, or 11% of the quarter's aggregate deal flow. Most notable was the acquisition of en'tegrate, an Axapta solutions provider, by Avanade, a joint venture formed by Microsoft and Accenture.

Also of note during the quarter were transactions involving ERP services providers, including Zannett's (Nasdaq:ZANE) acquisition of the Oracle consultancy Whitbread Technology Partners, and transactions within the Business Intelligence (BI) arena.

Melanie McFaddin, President of The McFaddin/Metis Group and an active participant in the IT services M&A market for ten years, commented; "The first quarter got off to a strong start again this year. It is my opinion that activity will continue to escalate as sellers see more substantial opportunities to partner with well-capitalized buyers in servicing clients in this improving IT services environment." She further noted that "indications are that sellers are considering exploring the M&A market in the near future given the increased activity and a desire to realize a liquidity event during this next cycle."

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.