EY Technology 4Q13 M&A report

Global technology M&A update:

October–December 2013 and year in review

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Opportunity and disruption combined in 2013 to drive global technology M&A aggregate value up 65% to a post-dotcom-bubble record of $188.2 billion.

By “opportunity,” we mean deals driven by the strategic growth opportunities emerging from the five transformative megatrends described below. By “disruption,” we mean deals involving established companies driven to a crossroads by the disruptive power of those same megatrends.

It is an interesting time, indeed, to be a student of technology industry M&A.

“Big, transformative deals returned in 2013, whether driven by the strategic growth opportunities emerging from customer demand related to the five transformative technology megatrends of mobile, social, cloud, big data analytics and accelerated technology adaptation, or the opportunity to re-invigorate companies disrupted by those megatrends. A surge in confidence in the global economy by technology executives and the disruption being caused by the megatrends, despite recent stock market volatility, continued political instability and lingering valuation gaps, indicate 2014 will be a strong year for technology M&A.”

—Joe Steger,
Global Technology Industry, Transaction Advisory Services Leader, at Ernst & Young LLP

Deal drivers

  • Even though global technology M&A volume declined in 2013, cloud/SaaS-related volume increased and smart mobility held steady, creating a kind of “background  radiation” for technology deal-making.
  • Advertising and marketing technologies drove slightly more 2013 volume than other major technology deal drivers, including big data analytics, social networking, security and health care information technology (HIT). All declined a bit YOY, but each still drove between 100 and 250 deals.
  • Financial services technology emerged as a significant volume and value driver in 2013, with approximately 100 deals.
  • Non-technology buyers increased technology-buying activity all year, ending with 14% of full-year aggregate value and 13% of volume.
  • We saw roughly 200 divestiture deals.

Look ahead

As the late-year momentum of 2013 suggests, a confluence of factors are coming together to indicate that 2014 will be a strong year for technology M&A.

Deal volume in the last two quarters of 2013 averaged 711 deals per quarter, compared with 644 deals per quarter in the first half. And second-half aggregate value totaled $118.4 billion, compared with $69.8 billion in the first half.

Further, deal making may be continuing into the first quarter of 2014 with several big-ticket deals already announced in Q1 2014, normally the quietest quarter of any year.

Technology companies that haven’t adopted technologies such as cloud/SaaS and smart mobility quickly enough will find themselves at a crossroads, or with non-core or underperforming assets in need of divestiture. As technology permeates other industries, those industries are likely to continue increasing their role in technology M&A.