July tech M&A dealmaking rockets 2016 past 2015’s record-setting pace

July 2016 M&A at a glance

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With two deals above $10 billion and one that just missed that threshold, July posted the highest monthly disclosed value for global technology M&A since October 2015 — and the second-highest in the 16 years since the dotcom boom. July’s total brings year-to-date (YTD) 2016 disclosed deal value to $287 billion, 27% ahead of YTD 2015 ($225.8 billion) and higher than any full year between 2015 and the dotcom boom.

Incumbent tech companies continued their cloud-mobile-social-driven transformations, and private equity (PE) buyers posted their highest-value month since February 2013. Thanks to one $32.4 billion megadeal, non-tech-buyer value for the month exceeded the non-tech total for all previous full years except 2015. Cross-border deals set a new quarterly value record with just July’s tally. Divestitures remained strong without setting records, as did China’s buyers.

Value: After nearly doubling from May to June, aggregate disclosed deal value increased another 44% to $94.7 billion in July from $65.9 billion in June. It soared 340% year-over-year (YOY) from July 2015’s $21.5 billion. There were 14 deals at or above $1 billion, matching the total for the entire first quarter of 2016.

Volume: July’s total of 315 deals fell from 378 in June and was down 5% from 2015’s monthly average volume of 333 deals. It was also 24% down from July 2015, which had the highest volume of that year (413 deals). At 2,356 deals YTD, 2016 is now 52 deals behind the first seven months of 2015.

Tech buyers: July saw many software incumbents look to expand their transformations, primarily through strategic cloud/SaaS acquisitions. Software targets contributed 130 deals (106 of which were acquired by tech buyers), or 41% of July’s total volume. Top tech-buyer targets also included semiconductors, internet and IT services. Five deals with corporate tech buyers topped $1 billion.

Non-tech buyers: Disclosed value of non-tech-buyer deals totaled $43.8 billion in July, putting YTD 2016 106% ahead of YTD 2015 — and 53% ahead of full-year 2015. There were four deals at or more than $1 billion. The largest deal, at $32.4 billion, anticipates Internet of Things (IoT) growth: it involves a Japan-based multinational mobile telecommunications holding company planning to acquire a UK semiconductor company specializing in mobile processors.

China: Chinese buyers posted $7.9 billion in disclosed value, 88% of which went to cross-border deals. At $55 billion YTD, Chinese buyers are already 38% ahead of their full-year 2015 total of $39.9 billion. In volume, July’s 17 deals brought China’s YTD total to 104 deals, more than twice the YTD 2015 total of 51.

PE buyers: Due to July alone, 3Q16 is already the fourth-highest PE quarter by value. PE buyers posted $16.8 billion in disclosed value, bringing the YTD total to $50 billion — more than twice YTD 2015 ($23.4 billion) and only 11% behind 2015’s full-year total of $55.9 billion. The month’s largest deal came from a Chinese consortium’s plan to acquire mobile casino gaming technology for $4.4 billion.

Cross-border (CB): European countries continued to be the primary targets in July CB dealmaking. Of the month’s record $53 billion in CB deal value, $37.4 billion (71%) targeted European companies. Japan was the biggest CB buyer in disclosed value, thanks to the $32.4 billion megadeal. China was second, at $7 billion. The UK, the US and Israel were the top three targeted countries by value, in that order.

Deal drivers: Deal volume remained strong for several of the deal-driving trends we follow. Big data analytics, cloud/SaaS, health care IT, IoT and gaming all pressed ahead of their YTD 2015 volume. Those five trends, plus security, mobility, and advertising and marketing, are ahead of YTD 2015 in value terms. Payments and financial services and big data analytics are slightly behind in YTD value. Big ticket deals pushed several trends above the others in dollar-value terms, including mobility ($40.6 billion in disclosed value), IoT ($32.5 billion), cloud/SaaS ($14.9 billion), and advertising and marketing ($8 billion).

Note: All dollar references are in US dollars, unless otherwise stated.

"Technology dealmaking will continue to set records because all buyer types are motivated in the current environment. Incumbent tech companies seek deals to accelerate mobile- and cloud-driven transformations; non-tech companies seek strategic technologies; and PE firms see opportunity in hidden gems overlooked by many investors."

EY - Jeff LiuJeff Liu
EY Global Technology Industry Leader
Transaction Advisory Services

 

 

EY infographic - July 2016 at a glance

  • Our report methodology
    • Our monthly at a glance report is based on EY’s analysis of The 451 Group M&A KnowledgeBase data. All data in this report is subject to final verification at the end of the quarter. Deal activity and valuations may fluctuate slightly based on the date the database is accessed.
    • Technology company M&A data was pulled from The 451 Group M&A KnowledgeBase based on the database’s own classification taxonomy and then deals were aligned to the following sectors: communications equipment (CE); computers, peripherals and equipment (CPE); semiconductors, software/SaaS, IT services and internet companies. Alignment was based on the sector of the target company.
    • The data includes M&A transactions between two technology companies as well as non-technology companies acquiring technology companies.
    • Joint ventures were not included.
    • Equity investments that involved less than a 50% stake were not included in the data.
    • PE M&A activity includes both full and partial stake transactions in excess of 50% and was analyzed based on acquisitions by firms classified as private equity, sovereign wealth funds, investment holding companies, alternative investment management groups, certain commercial banks, investment banks, venture capital and other similar entities.
    • Unsolicited technology deal values were not included in the data set, unless the proposed bid was accepted and the deal closed based on data available at the time of analysis.
    • All dollar references are in US dollars, unless otherwise indicated.
    • In this report, disclosed deal values may vary from other published values because The 451 Group database methodology automatically subtracts cash acquired, net of debt, from enterprise value. Additionally, announced deal values are often subject to change at the time of close, due to subsequent revisions to the terms of the deal and/or changing stock valuations to the extent stock was used as a deal consideration.
    • “Total value” refers to the aggregate value of deals with disclosed values for the period under discussion.