Global technology M&A update: Q313 highlights

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An unusual mix of deal drivers came together in the third quarter of 2013, spurring big-ticket deal-making and driving global technology M&A aggregate disclosed value to a new post-dotcom-bubble record of US$71.2 billion.

Technology megatrends — especially those related to smart mobility, cloud computing and software-as-a-service (SaaS) adoption — played a key role in Q313 technology deal making. According to our Q313 M&A report, while some deals envisioned accelerating growth in alignment with these megatrends, others hoped to recapture growth that was disrupted by them.

“Deal-making confidence is returning to global technology M&A, as evidenced by the record value and renewed volume growth in the third quarter. And as returning confidence overcomes macroeconomic and geopolitical uncertainty, unresolved regulatory issues and valuation gaps, we will continue to see steady growth in technology M&A volumes.”

—Joe Steger,
Global Technology Industry, Transaction Advisory Services Leader, at EY

Deal drivers

Smart mobile disruption: Smart mobility made its presence felt more than usual in Q313, driving deals targeting strategic growth through mobile technology, as well as deals targeting established companies weakened by rapid smart mobile adoption.

Volume grows, but lags value: Deal volume increased sequentially in Q313 after experiencing three consecutive quarterly declines. However, the growth was disappointing in comparison with aggregate value growth of 113% sequentially and 152% YOY.

PE deal-making remains high: At 60 deals and US$11.2 billion in aggregate value, PE deal-making is close to the upper end of the range we’ve seen in the last five years — despite the fact that the Q313 value total is the lowest so far this year.

In reversal, cross-border activity climbs:  Cross-border (CB) deal volume and value reversed long-term declines as value in Q313 nearly quadrupled sequentially to US$24.5 billion. Volume increased 13% sequentially to 220 deals.

Look ahead

We continue to expect moderate growth in deal volumes for the next few quarters. The forces of disruptive innovation from the five megatrends (smart mobility, cloud computing, social networking, big data analytics and accelerated adaptation) and technology executives’ growing confidence will overcome valuation disconnects.

Aggregate disclosed value, however, is more of a wild card. The need for companies to grow both at the top line and bottom line still persists.  We expect value to grow, but not from the Q313 record of US$71.2 billion. Rather, value growth will pick up where it left off, growing modestly from the trailing 12-month average before Q313, which was US$31.9 billion per quarter.