"Mobile, cloud and social trends are driving technology innovation and M&A activity. These areas will continue to drive technology sector growth for the foreseeable future." Joe Steger, Global Technology Transaction Advisory Services Leader
Will global technology M&A hit “pause”?
In 3Q11, global technology M&A provided a counterpoint to the global macroeconomic malaise prevalent in headlines. The waves of innovation that technology companies have been delivering around smart mobility, cloud computing, social networking, business intelligence/analytics and so many other new technologies are truly exciting.
Transforming that innovation into economically actionable products and services often requires significant M&A activity. In fact, we’ve seen how that activity causes these trends to intersect with each other, and how it enables innovation in non-technology industries such as health care, financial services and education.
But can such robust technology M&A values be maintained in the face of continued macroeconomic uncertainty and extreme equities markets volatility? At some point, determining correct valuations becomes challenging, indeed. We’ve already seen M&A volume decline 5% from 1Q11 to 3Q11. But our analysis suggests that the current level of between 700 and 800 deals per quarter may be the sectors naturally sustainable level, and will only change significantly during bubbles or recessions.
In terms of values, because it’s been 11 years since the last time there were two or more deals above $10 billion in the same quarter, we expect aggregate and average values to drop in the fourth quarter. However, in the long run the disruptive technology megatrends described above are certain to drive increasing strategic deal-making among global technology companies. And we’re in it for the long run.