A PriceWaterhouseCoopers report earlier this week predicting brisk deal activity in the tech sector ran counter to the prevailing notion that M&A activity slows down when financial markets are volatile.

In an email interview on Friday, PWC partner Andy Morgan elaborated on his findings, noting that this year's soft stock market had created a disparity between public company multiples, which had declined, and transaction multiples, which were holding up better.

"The implication of this is that the public markets are likely to prove fertile feeding ground in the near term for both trade and private equity acquirors alike," Morgan wrote in response to a question on his report. "In the U.K., we have already seen this in Q1 '08 with two significant public to private transactions," he wrote, citing Kohlberg Kravis Roberts & Co.'s $1.2 billion acquisition of human resources software maker Northgate Information Solutions plc, and 3i Group plc's $440 million purchase of software maker Civica plc.

But he also noted that future deal valuations could be susceptible to vendor price expectations.

"Our view is that there will probably be a period where there is some adjustment and maybe we start to see transaction pricing multiples drift downwards to close some of the 'valuation gap' we have been seeing compared to the public markets," Morgan said.

What does all this mean for high-tech deals in the U.S.? As Bernstein Research analyst Charles Di Bona notes,  Microsoft Corp.'s [MSFT] efforts to buy Yahoo! Inc. [YHOO] ignore the fact that the current $31 per share offer looks stronger as Microsoft's share price weakens.

"Even restoring the bid to the original $31 per share now represents a bump given the decline in Microsoft's own share price," Di Bona wrote. -- Andrea Orr

See April 21 story from Reuters.com
See Feb. 19 story from TheDeal.com
See December 2007 story from TheDeal.com
See March 28 story from TheDeal.com