Technology M&A leads the way

The value of technology mergers and acquisitions has almost doubled in the second quarter of 2011, as sectors such as cloud computing and smart mobile technology continue to drive values.

Research published by accountancy giants Ernst & Young shows that the value of global tech M&A rose to $52.1 billion (£32.1 billion) in the second quarter of this year, up from $27.1 billion in the first quarter.

Explaining the shift, Joe Steger, global technology transaction advisory services leader at Ernst & Young, says that the high aggregate and average values of tech transactions are a testament to the power of the ‘disruptive technology innovations’ that are occurring today.

He adds: ‘New waves of innovation, especially around smart mobility, cloud computing and social networking, are now influencing the development of the entire global economy.’

While recent research has found that ‘big ticket’ M&A has been stifled by increased regulation, Ernst & Young’s findings show that technology has steered clear of this issue with a number of large corporates ‘placing key bets on future strategic growth’.

The findings also showed that while the surge sectors mentioned above have driven the ‘mega deals’ completed during the second quarter, they have also been responsible for driving ‘hundreds’ of smaller deals.

Stegar explains: ‘Importantly, even though 61 per cent of all disclosed value was concentrated in the top 10 deals, we also saw significant deal-making strength at the opposite end of the spectrum, in deals of less than $100 million.’

Top 5 global deals by value (April-June 2011):

1. Microsoft acquisition of Skype – $8.55 billion

2. Texas Instruments acquisition of National Semiconductor – $6.1 billion

3. Applied Materials acquisition of Varian Semiconductor – $4.75 billion

4. Toshiba acquisition of Landis+Gyr AG – $2.29 billion

5. CenturyLink acquisition of SAVVIS – $2.28 billion

While the number of deals fell during the second quarter, from 794 in the first three months of 2011 to 777, average deal size grew by 92 per cent to $194 billion.

The findings show that cross-border deal value and volume has grown at a faster rate than in-border. Cross-border deal volume was 16 per cent higher sequentially and 32 per cent higher than the second quarter of 2010.

According to a statement, the ability for technology companies to stockpile cash has given them the ability to act when M&A opportunities arise. The report shows that the cash and investments held by the sector’s top 25 companies grew by 18 per cent (year-on-year) to $591 billion.

The strong performance shown by private equity at the start of 2011 is mirrored in the tech sector, with aggregate value rising to its highest position since 2007, at $8 billion.

Todd Cardy

Adelbert Swaniawski

Todd was Editor of between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital. Connect with...

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