Technology transformation drives record dealmaking in 2014, and sets stage for 'robust' 2015

New York, 27 January 2015

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  • 4Q14 aggregate value of disclosed-value deals was US$44.9b
  • At 959 deals, quarterly volume set a fourth consecutive post-dotcom-bubble record
  • Technologies that are transforming entire industries — or have the potential to do so — continue to drive technology M&A
  • Advertising and marketing, security and internet of things (IoT) aggregate deal values jumped in Q4

According to EY’s Global technology M&A update: October-December 2014, corporate technology dealmakers backed away from big-ticket deals in 4Q14, but, nonetheless, full-year 2014 set M&A volume and value records that were surpassed only in 2000, at the height of the dotcom bubble. The report also finds continuing evidence of an underlying strength in global technology M&A that is helping to drive technology transformation across industries.

According to the report, mid-sized deals, ranging from US$100m up to US$1b, remained strong and deal volume in this category set another new post-dotcom-bubble record. The report also finds that if equity market volatility calms, the market could see a rapid return of big transformative deals.

Jeff Liu, Global Technology Industry Transaction Advisory Services Leader at EY, says: “Globally, technology corporate development teams took a breather in 4Q14. But I don’t doubt for a minute they’ll be back with transformative deals soon. Technology companies will continue using M&A to keep up with the astonishing pace of change as they seek to re-orient their own operations around new marketplace realities, realize the full value of ‘hidden gems’ inside their organizations, bring needed security solutions to market and stay out of the crosshairs of innovative upstarts.”

Report highlights:

  • 4Q14 aggregate value of disclosed-value deals was US$44.9b, down 39% from a record-setting third quarter. But the 2014 annual total was US$237.6b, higher than any year on record except 2000.
  • At 959 deals, 4Q14 volume set a fourth consecutive post-dotcom-bubble quarterly record. Full-year 2014 posted 3,512 deals, beating 3,345 in 2007 to achieve the highest volume of any year except 2000.
  • Advertising and marketing, security and internet of things (IoT) aggregate deal values jumped; in fact, the 4Q14 totals for the first two were more than their year-to-date (YTD) totals through 3Q14.
  • Private equity (PE) and non-technology buyers both also increased aggregate value; together, they accounted for 48% of total 4Q14 value (compared with 22% YTD through 3Q14). PE buyers appeared to target companies struggling with mobile-social-cloud transitions (companies we call “in the crosshairs”).
  • Cross-border (CB) aggregate deal value declined 38% from a record-setting 3Q14 but remained strong, with a 45% share of total quarterly value.

Looking ahead: robust dealmaking expected

2014 was a blockbuster year for technology M&A. But, unlike 2000, it was not a bubble. Despite the occasional “moonshot” from a handful of deep-pocketed buyers, the vast majority of deals were measured in reality-based multiples of good-old-fashioned revenue, profit or cash flow. According to EY, while 2015 may not hit the same lofty highs as 2014, the firm expects another robust year of technology M&A in response to the transformations sweeping technology and rippling through all industries of the global economy.

View an infographic from the report and the full results online at www.ey.com/technology

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About the Global technology M&A update
The October-December 2014 issue is based on EY’s analysis of the 451 Group M&A KnowledgeBase data for 2012, 2013 and 2014. Deal activity and valuations may fluctuate slightly based on the date the database is accessed. The full report is available at www.ey.com/technology.

About EY’s Global Technology Center
EY’s Global Technology Center (GTC) is a network of 15,000 technology practice professionals from across our global member firms, all sharing deep technical and industry knowledge. Our high-performing teams are diverse, inclusive and borderless. Our experience helps clients grow, manage, protect and, when necessary, transform their businesses. We provide assurance, advisory, transaction and tax guidance through a network of experienced and innovative advisors to help clients manage business risk, transform performance and improve operationally. Visit us at ey.com/technology and follow us on Twitter @EY_Technology.