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Tech firms' mergers signal potential growth

Check out Gus' story in today's Sun on recent mergers and acquisitions in the Baltimore tech scene.

Two technology firms in the Baltimore area merged with out-of-state competitors last week, part of a trend that analysts hope will mean more deals after corporate financing had been crimped by the recession.

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In one of the deals, eMagination, among the largest and oldest Internet development companies in the city, was acquired by a Massachusetts company for $4.3 million. And Owings Mills-based AirVersent Inc., a company that makes supply chain software, merged with a Pennsylvania company but didn't release financial details of the deal.

The acquisitions came on the heels of other Maryland technology companies turning to Wall Street to raise money through initial public offerings.

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While no one is predicting a return to headier days, industry analysts are forecasting an uptick in technology deals. PricewaterhouseCoopers predicted earlier this year that mergers and acquisitions in the tech sector would increase compared to last year.

More technology companies also are expected to turn to IPOs this year, meaning that investors in early stage companies stand a chance of recouping their investment and potentially funneling more money into new projects, according to PricewaterhouseCoopers.

"I'm definitely seeing an improvement in activity," said Rick Kohr, chief executive of Evergreen Capital LLC, a corporate finance advisory firm in Columbia. "But everybody is more methodical than they might have been in 2007 or 2006."

As companies merge and are acquired, investors can free up investment capital and use it to fund new companies, said Matthew Gorra, a law partner in DLA Piper's corporate and securities group. And news of just a few deals can trigger a herd mentality and a deal spree.

Companies start to look at mergers and acquisitions as a necessity to keep pace with their competition, he said. Other companies may see the economy improving and want to jump at the chance to acquire a complementary company as an opportunity for quick growth.

"There were a lot of people trying to wait it out last year," Gorra said. "This year, people are more willing to make investments."

With credit markets still relatively tight, small and young companies are struggling to finance their growth and might have investors who are looking for a return on their investment — thus the pressure to merge or be acquired, industry observers said.

On the IPO front, SafeNet Inc. of Belcamp, which specializes in cybersecurity, recently disclosed plans for a stock sale and hopes to raise $300 million. Bridgeline Digital Inc. of Woburn, Mass., bought eMagination last week. eMagination builds websites and electronic commerce programs for commercial and government customers and reported sales of $5.4 million over the past year. Bridgeline promoted the deal as a way to expand its client base into the government sector.

Airclic Inc. of Trevose, Pa., a suburb of Philadelphia, merged with AirVersent Inc. of Owings Mills in a deal that creates a profitable company with revenue of $22 million a year, executives said.

Rick Pontin, Airclic's chief executive, said the two private companies, both of which specialize in software that helps firms manage mobile workforces, didn't overlap in terms of customers and they were starting to see more demand for their services.

"There are a lot of mergers and acquisitions when markets are about to come back," Pontin said. "People are thinking about how they can grow the business."

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