“First quarter M&A results suggest an extremely robust year for technology M&A in 2011. Realistically, however, we must temper those pluses with concern over geopolitical unrest, global debt issues and other unforeseeable possibilities.”

	Joe Steger
Global Technology Transaction Advisory Services Leader, Ernst & Young

The top 100 global technology companies tripled their M&A spending to $11.5 billion during the first quarter of 2011 compared with the first quarter of 2010, when they spent approximately $3.7 billion.

Most of that big-ticket spending was focused on storage companies and on semiconductor communications chip companies, purchases that better position the buyers in the growing cloud computing and smart mobility trends.

Top 100: a growing portion of M&A spending

First quarter 2011 M&A activity of the top 100 group reversed a trend seen in 2010, when the group increased in small strategic deals, often under $100 million or with no disclosed value. As a result, the group's spending as a percentage of total global technology M&A spending decreased from approximately half in full-year 2009 to 39% in 2010. In 1Q 2011, however, the top 100 group's spending increased slightly to 42% of the quarter's total global technology M&A spending of $27.1 billion.

Deals involve cloud computing and smart mobility

Ninety-six percent of top 100 M&A spending in 1Q 2011 was concentrated in eight deals above $100 million, which are listed in the accompanying chart. Two of the eight deals touch on cloud computing, as both buyers in those deals are gaining storage hardware typically used in or attached to servers in cloud or enterprise data centers.

Top 8 deals ($100 million +) of the top 100 global technology companies, 1Q11

On the smart mobility front, top 100 companies did three semiconductor sector deals involving communications chips for a combined value of approximately $4.1 billion. The deals brought together chip manufacturers specializing in cellular communications devices with makers of Wi-Fi and other communications chips, including Bluetooth and GPS.

Top 100 sector concentration

Of note, because so much of the 1Q 2011 top 100 activity is focused in the semiconductors and computers, peripherals and electronics sectors, 1Q 2011 transactions of the top 100 companies were concentrated in those two sectors, especially compared with the rest of the industry's transactions.

For example, computers, peripherals and electronics companies accounted for 43% of the M&A value purchased by top 100 companies in disclosed-value deals, but that sector represented only 24% of the overall aggregate value purchased in the quarter.

Likewise, another 37% of the value purchased by the top 100 was from the semiconductor sector, compared with just 23% overall. In every other sector, top 100 companies purchased far less proportionally than the rest of the industry.

Outlook for technology M&A

Despite equity market volatility that often tends to slow M&A activity, estimates of 2Q11 M&A volume and value for global technology show high growth. Given the industry's current rapid pace of disruptive innovation, we expect the top 100 companies to continue increasing M&A activity this year; however, the high levels seen for M&A in the second quarter also create the potential for a pause in the second half.

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