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“Based on trends we’ve seen in the first quarter, the emergence of — and expectations for — the ‘smart world’ will continue to influence technology M&A activity.”
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| || ||Joe |
| ||Global Transaction Advisory Services Technology Industry Leader, Ernst & Young |
Increases in technology M&A transaction activity in 1Q11 were driven in part by rapid progress toward a “smart world” — a megatrend in which technology innovations are causing information to become a greater part of the value of all products and services.
One part of this megatrend driving global technology M&A transactions involves the growing use of embedded sensors, safety cameras, electric meters and other devices that generate information about the world around them; another involves business models based on the extraction of new information that previously could not be collected and analyzed, such as your location or the recommendations of your social network.
“Smart world” influences on global technology M&A deal-making in 1Q11:
- Mobile and social platforms continue to converge. Deals done by social media companies often targeted “hyper local” mobile advertising technology, mobile application development and mobile group messaging.
- In the IT services sector, deals in the financial services and health care industries demonstrate acquisition strategies designed to enable smarter and more efficient transactions and communications. For example, multiple deals in the financial services industry related to online and mobile payment and transaction processing technologies, while health care deals involved technologies for fraud detection, clinical documentation and medication management.
- As mobile devices get smarter, they become a potential point of corporate vulnerability. As a result, there were several security software deals in 1Q11, including deals aimed at acquiring technology designed to manage user identity and access.
- The top 10 transactions in 1Q11 included three semiconductor deals that brought together makers of communications chips for mobile phone technologies (3G and 4G/LTE) and chipmakers that produce devices for Wi-Fi, Bluetooth, GPS and other wireless data-sharing technologies.
- Companies across sectors are acquiring strategic video technologies to support the increasing use of video on mobile devices for entertainment, business conferencing and personal video calling purposes.
- The communications equipment sector saw transactions involving content and applications technologies, in part to support development of smart mobile “ecosystems” around competing handset operating system platforms.
“Based on trends we’ve seen in the first quarter, the emergence of — and expectations for — the ‘smart world’ will continue to influence technology M&A activity,” said Joe Steger, Global Technology Transaction Advisory Services Leader for Ernst & Young. “A dramatic rise in cloud computing and smart mobility in the last year, and the expected transition in 2011 and beyond to 4G and higher-speed mobile networks, will continue to enable innovative ‘smart world’ applications — and will continue to drive M&A activity.”
Indeed, in the last year the phrase “there’s an app for that” has gone from clever sound byte to user expectation. This speaks to real customer demand for new information applications and experiences, as well as the potential for virtually every business in every industry to increase revenue, affinity and new customer acquisition by delivering knowledge, applications and services that can be accessed on smart mobile devices.
Our Global technology M&A update, January–March 2011 is a comprehensive report on the industry’s transaction activity in the quarter. It provides in-depth analysis of the quarter’s statistical results and deeper dives into the above trends.
Executive bytes is a related and ongoing series where we take a closer look at what’s happening in specific segments of the technology sector.
More about Executive bytes contributor: Joe Steger