Tech deals still hot despite credit crunch

By Megan Davies

NEW YORK (Reuters) - The technology sector, strongly targeted in the recent leveraged buyout boom, could see some healthy deal flow, even as private equity firms pull back amid turmoil in the credit markets.

With debt markets effectively shut off for large leveraged buyout deals, investment bankers aren't expecting anything like the $17.6 billion buyout of chipmaker Freescale Semiconductor Inc or the $11.4 billion take-private of Sunguard Data Systems Inc.

But strategic buyers -- companies in the same industry rather than buyout firms -- now have some breathing room to strike deals without so much competition from private equity.

"Interestingly and importantly, new deal idea formation continues," said Jon Woodruff, head of technology M&A at Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research, Stock Buzz), "In addition to things that we were working on two or three or four months ago, new ideas continue to bubble up on a strategic-to-strategic basis."

M&A practitioners and business development executives in tech companies are "just about as busy as they were six months ago," said Woodruff, who also said current market conditions hadn't translated into a pause on strategic deals.

Corporates -- companies rather than buyout firms -- which had been distracted by take-private conversations with sponsors, or private equity firms, are now able to focus again on strategic growth and deals. Deals from several million dollars to the billions are in the pipeline, according to technology investment bankers who declined to be named.

The agendas of large-cap technology companies looking to do strategic transactions are completely unchanged by the credit markets, said a tech banker who declined to be named. That banker, along with two others who also declined to be named, said deal flow was still busy on the strategic front.

"Our pipeline of M&A activity has shifted, not just because the sponsors have dramatically pulled back, but because the corporates are much more active," said David Popowitz, a managing director of Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and global co-head of its technology group.