BUILDING INTERNET TIDAL WAVE PROPELLED M&A VALUE PAST THE TRILLION DOLLAR MARK IN 1999.

The total value of M&A transactions in the IT, communications and media industries worldwide leaped 154 percent to more than $1.2 trillion in 1999, with the total number of M&A transactions rising nearly 26 percent to 6,008 globally.

The road to e-commerce, particularly Web-based business-to- business, is lined with high-growth companies. The race to acquire highly valued, fast-growth players fueled a nearly 320 percent jump in the total value of digital media deals worldwide, while the number of digital media deals worldwide swelled over 190 percent.

The rush for bandwidth set in motion by the tidal surge of the Internet pushed hardware M&A activity to record heights, with total worldwide value of hardware deals up nearly 128 percent and the number of deals up 30 percent globally. In North America, value jumped 147 percent while the number of deals was up 42 percent.

The seismic impact of the Internet has led to intensified use of strategic M&A in high-growth areas while mature companies scramble to adapt their business models before it's too late, according to the Technology M&A Report: "Full Year 1999," from Broadview Int'l LLC, a leading global investment bank serving the IT, communications and media industries.

"The Internet has rendered technology M&A an indispensable tool for companies that want to be in business in the twenty-first century," says Paul Deninger, chairman and CEO of Broadview Holdings LLP. "The question for both emerging and established companies isn't whether to have an Internet strategy, it's choosing how to achieve significant presence and scale on the Internet as rapidly as possible."

B2B Is Heating Up

The Web-based business-to-business (B2B) market has begun heating up noticeably, with growth estimates over the next several years ranging from three to six times the market for business-to- consumer companies. "As a shakeout among consumer-focused e- commerce sites ensues, more and more companies, presented with the enormous potential for lower prices and greater cost efficiencies, are rapidly embracing Web-based B2B strategies," remarked Alec Ellison, managing director at Broadview and head of the firm's E-Media/Web Services and Enterprise/E-Business Software groups. "As companies implement real-time B2B systems over the Web, a competitive frenzy has developed among vendors, each of whom is vying for 'gorilla' status in this market segment."

No one is about to draw the curtain on Web-based business-to- consumer offerings. However, as primary content providers mature, their sights are clearly trained on capitalizing on opportunities in the business market, with personalization and one-to-one marketing forming the basis of competitive Web offerings.

Among the key beneficiaries of the push into B2B are developers of Web-based enterprise applications, aided by the emergence of corporate investors, such as CMGI and its billion-dollar "super fund," which has turned its focus on the B2B market. Additionally, a fast-growing number of newly public e-business companies are implementing an M&A strategy immediately upon going public. Companies such as Kana Communications, customer relationship software company E.piphany and business-to-business electronic procurement specialists Ariba Technologies and CommerceOne activity pursued this strategy in 1999.

Infrastructure "Enablers" Played Catch-up with E-Commerce

One area where the trajectories of B2B and retail e-commerce companies converge is in the linkup between customer-driven events at the "front end" with crucial internal processes at the "back end." With the IT budgets of proliferating e-commerce- minded companies liberated from Y2K jitters, there is increasing emphasis among these companies to solidify this part of the chain, spelling opportunity for so-called "enabling" companies offering expertise in areas such as systems management, reporting, provisioning, storage, security and system stability.

"Developers of software, services and tools are competing to build the foundation to support e-commerce, both retail and B2B," commented Deninger. "These companies are working feverishly to amass the competencies needed to carve out market leadership in this hot new area."