An increased confidence in the global dealmaking environment is highlighted in the most recent CCB as over 80% of technology respondents said corporate earnings, short-term market stability and credit availability were all improving. Further, 65% of respondents say they intend to pursue cross-border technology acquisitions, up from 26% in our prior CCB in October 2018.
Further propelling M&A activity is the mounting investor pressure on maturing companies to combat slowing organic growth. We see most companies respond to growth concerns by looking internally at portfolio optimization and divestitures (see EY Technology Global Corporate Divestment Study) as well as externally in the market at M&A to unlock growth. As M&A becomes the new growth engine, more companies are buying assets to scale existing technology to not only survive in the market, but to win.
Megadeals on the rise
The first quarter of 2019 saw a 5% decrease in the number of announced technology deals, but a 4% increase in total deal value over the prior quarter. Looking back to the first quarter of 2018, deal volumes and values are up 2% and 39%, respectively, in the first quarter of 2019, further highlighting that larger technology deals are on the rise. Notably, there were 11 technology deals with a purchase price of US$3b or greater compared with 9 such deals in the fourth quarter of 2018. An active deal market not only signifies confidence in the global economy, but underscores the reality facing both growing and maturing companies of all sectors: transformational technology deals are needed to evolve their businesses to not only win in the market, but to survive.
Looking forward at the next 12 months, roughly two-thirds of executives expect deal pipelines to grow in the coming year, buoyed by growing confidence in the technology sector. Only 51% of respondents in our prior CCB believed the technology sector was improving from a holistic standpoint. Our latest poll shows supreme confidence in the sector, with 92% of respondents indicating the technology sector is moving in the right direction.