Technology M&A sets all-time value record of US$466.6b in 2016 driven by disruptive cloud, mobile, social and data analytics

Singapore, 14 March 2017

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  • Asia-Pacific and Japan (APJ) aggregate value soared 174% to a record US$141.4b in 2016

Digital transformation drove global technology M&A in 2016 to an all-time value record, according to the EY Global technology M&A report: October-December 2016 and year in review. Aggregate 2016 deal value was US$466.6b, the highest value recorded in the industry, and 2% more than the prior record set in 2015 of US$459.6b.

In contrast to the full year’s deal value increase year-over-year (YOY), deal value in the fourth quarter declined 38% YOY to US$117.2b. Full-year deal volume declined 5% in 2016 to 3,796 deals and a 7% sequential 4Q16 drop to 844 deals was the second consecutive quarterly decline seen since 2012.

Jeff Liu, EY Global Technology Industry Leader, Transaction Advisory Services, says:

“The second-half slowdown in global technology M&A deal volume suggests tech companies are approaching a dealmaking plateau. But with digital disruption still in its infancy and the extraordinary growth of IoT-related deals, we don’t expect this dip in volume to translate into a long-term decline in dealmaking.”

West-to-East technology M&A value shift

APJ was the only region whose aggregate value rose for the year: up 174% to US$141.4b. The region’s rise, coupled with a 23% fall in US buyer value, caused a notable West-to-East value shift: APJ’s share of global technology M&A value nearly tripled to 30% from only 11% in 2015.  The hike was largely driven by China and Japan – both accounted for 76% of the increase. Also, 24 big-ticket deals totaling US$108.9b in 2016 across APJ dominated the increase.

Mr. Joongshik Wang, EY Asean Transactions Leader for Technology, Media and Telecommunications, said:

“The west-to-east value shift in 2016 was due to a combination of a few big-ticket deals in APJ while the US market experienced a slow year for deals, which is likely to continue in 2017. We may see an even bigger hike in APJ deal activity for 2017 since Asia’s old tech industries such as telecom and media strongly require further consolidation. Activity will also be driven by continued interest from APJ investors in new tech companies in areas such as Fintech, e-commerce and IoT where there are proven business models in the US market. Another possible trend this year will be large institutions showing more interest in disruptive companies to aid them in their digital transformation.”

2016 was a year of record semiconductor consolidation driven by IoT technologies, cross-industry “blur” from non-tech buyers, unprecedented cross-border deal value and record private equity (PE) buying:

  • Semiconductor targets set a new aggregate deal value record of nearly US$125b in 2016, as IoT and automobile-driven dealmaking that arose in 2015 gained momentum.
  • IoT deal volume increased 30% to 221 deals for the year and deal value tripled (+203%) to US$103.4b. Connected car-driven deals accounted for US$57b (55%) of total IoT deal value.
  • Non-tech buyers acquired 23% of 2016 all-deal aggregate value (up from 12% in 2015). In APJ, non-tech buyers accounted for 39% of the region’s value. This increasing deal competition coming from buyers outside of the technology sector may be one of the factors supporting high deal valuations.

Liu says: “Massive disruption from cloud, mobile, social and big data analytics technologies drove global technology M&A to all-time value highs in 2016 and will remain strong drivers in the year ahead. But companies should prepare for new disruptions, including artificial intelligence and machine learning, which could push dealmaking even higher late in the year and in 2018.”

To view a full copy of the EY Global technology M&A report: October-December 2016 and year in review, visit: ey.com/technology.

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About the EY Global Technology Sector

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About the EY Global technology M&A report: October-December 2016 and year in review

The October-December 2016 issue is based on EY’s analysis of The 451 Group M&A Knowledge Base data. Deal activity and valuations may fluctuate slightly based on the date the database is accessed. The full report is available at ey.com/technology.