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|Joe Steger |
Global Technology Transaction Advisory Services Leader
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|Jeff Liu |
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TAS Area Co-leader, Japan
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|Dr. Carsten F. Risch |
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|Neil Hutt |
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|Simon Pearson |
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“Many of the deals this quarter were designed to make products and services more viable in a ‘smart world’ context, through new or complementary technology.”
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| || ||Joe |
| ||Global Transaction Advisory Services Technology Industry Leader, Ernst & Young |
Global technology M&A gets a boost from other industries
As technology enables innovation across all industries, non-tech company participation in global technology merger and acquisition (M&A) transactions resulted in 15% of all disclosed value in the first quarter of 2011 — roughly $4.2 billion out of $27.1 billion. Such M&A activity is an important factor in the ongoing blurring of boundaries between technology and other industries.
Notably, the rate of non-tech participation in global technology M&A by dollar value nearly doubled from 8% in 2009 to 15% in 2010, and the total 15% in 1Q 2011 maintains that new higher level so far this year. Meanwhile, technology companies bought only $751 million (3%) in disclosed value of non-tech company sellers in 1Q 2011.
Highlights of global technology transactions involving non-tech companies in 1Q 2011 included:
- A US telecommunications network operator was the largest non-tech acquirer, making a $1.3 billion bid for a data center services company in order to expand the acquirer’s strategic initiative into cloud computing services.
- There was a similar, though far smaller, $211 million deal in which a cable communications company also acquired a company that provides cloud computing services.
- The two deals above helped make non-tech buyers the largest acquirers of companies in the IT services sector in 1Q 2011: they bought 44% of all the value sold, compared with 42% bought by IT services companies themselves.
- One of the biggest disclosed-value deals in the internet sector was by a non-tech company: a household-name luxury retailer's acquisition of an e-commerce company whose website offers steep discounts for designer brands during 48-hour exclusive sales.
- Also in the internet sector as an example of a technology company buying a non-tech company: an internet company acquired a news, analysis and lifestyle site for $315 million.
- As mobile payment technology heats up, a credit card company made its second acquisition in under a year of a mobile and online payments services company — in this case, one that offers a virtual currency for exchange across many videogame, social network and other virtual environments — expanding the potential of "monetization as a service" in cloud and mobile environments.
- In a handful of vertical integration deals, power companies purchased solar and other energy-efficient technology companies (or vice versa).
Non-tech buyers acquire 15% of global technology transaction value in 1Q 2011
“Many of the deals this quarter were designed to make products and services more viable in a ‘smart world’ context, through new or complementary technology,” says Joe Steger, Global Technology Transaction Advisory Services Leader. “As non-tech companies continue to see information become an increasingly important component of the business value of their products and services, we expect them to continue acquiring technology companies.”
This is yet another trend suggesting a robust year for global technology M&A transactions in 2011.
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 industry.