Computer and electronic industry set for mergers

The global credit crisis could trigger acquisition activity in the electronics sector, according to one of the UK's largest industry groups, TT Electronics.

TT has increased its search for strategic acquisitions to expand its electronics and electrical equipment businesses in the hope that some private equity groups may be looking to sell businesses as financial pressure builds.

"The global credit crisis has reduced price expectations of business sellers and may provide trade purchasers such as ourselves with greater opportunity," said TT Electronics.

Private equity firms, which have built up their interests in the electronics sector in recent years, are coming under pressure as financing terms tighten around the world.

"Work on acquisitions has continued throughout the year but no suitable prospects at an acceptable price have been identified.TT electronics remains cautious of opportunities requiring prices based on high multiples of profits," said the company.

TT is also in the middle of a programme to move more of its manufacturing to lower cost regions.

In the last year the group has transfered more of its manufacturing from the US and Europe to low labour cost areas, in particular Malaysia and China. Further transfers are planned for the manufacture of electronic systems, sensors and components to our facilities in China, India and Mexico.

"These moves are essential to remain cost competitive and improve future operating margins," said executive chairman John Newman.

TT reported full year operating profit from continuing activities slightly ahead at £37.7m on sales of £544.9m. During the year the group sold its low margin cable business, AEI Cables.


"TT electronics has reported further growth in 2007, despite deteriorating market conditions in North America and the weakness of the US dollar," said Neil Rodgers, chief executive.

"In the current economic climate, with the global credit crisis still evident, the effect of fluctuating exchange rates and the potential for either recession or at best a slow down in our main markets, we remain cautious about 2008."