News International Deal Surge in Tech M&A
Companies pursuing strategic growth opportunities related to the five transformative megatrends, which include mobile, social, cloud, big data analytics and accelerated technology adaptation, drove big ticket transformative deals in 2013, as many established companies found themselves at a crossroads by the disruptive power of these same megatrends.
Big-ticket deals (of US$1b or more) increased in number to 36 in 2013, up from 28 in the prior year, and more than doubled in value, to US$122.6b in 2013 compared with US$51.8b in 2012. Full-year average value was US$283m, up 51% from US$188m in 2012.
Joe Steger, EY’s Global Technology
Industry
Transaction Advisory Services Leader, says:
“Big, transformative deals
Security, financial services and
ecosystem-building
drove deals. 2013 saw a spike in deals targeting financial
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.”
The report identifies the following key trends and deal drivers:
services technology such as mobile payments, as well as deals for application programming
SaaS disruption interfaces
(APIs), mobile back-end-as-a service (MBaaS) and devops. Those three technologies are key to creating developer friendly environments — a critical element in many large technology companies’ plans to develop ecosystems of products and services around their core offerings.
Corporate value grows, but PE and non-technology buying soars. After declining 32% in 2012, corporate deal-makers grew aggregate value 35% in 2013 to US$129.4b but remained below their 2011 mark of US$140.9b. PE value fell more than corporate last year, but tripled in 2013 to US$58.8b (from US$18.5b in 2012), sailing past 2011’s PE value of US$34.8b.
Smart mobility and cloud/ drive
transformative deals across multiple sectors. The rise of smartphones and tablets drove an unprecedented 10% PC shipment decline in 2013 as businesses and consumers accelerated their shift to mobile devices. Large corporations accelerated their adaptation to mobility, revamping their software architectures toward SaaS solutions that can better accommodate lightweight, mobile client devices.
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 US$118.4b , compared with US$69.8b 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.
Steger concludes: “Technology companies that haven’t adopted technologies such their business to address the five disruptive megatrends of mobile, social, cloud, big data and accelerated technology adaptation quickly enough may find themselves at a crossroads, with non-core or underperforming assets in need of divestiture. Separately, as technology permeates other industries, those industries are likely to continue increasing their role in technology M&A.”
10
www.finance-monthly.com
Energy Sector
The energy sector will play a leading role in the global M&A revival, with energy firms significantly more favourable toward M&A than companies in other sectors, according to wide ranging research by international law firm, Hogan Lovells.
The research - which examines the views of 40 senior executives across oil and gas, traditional power and renewable energy companies, as part of a broader survey of business executives across six sectors - reveals that:
1. Energy sector executives are more positive about the potential of M&A than their peers in any other sector, with almost nine in 10 executives (85%) considering M&A to have delivered what they had hoped for in the past (against three in four executives across other sectors).
Brazil’s Growth
Brazil’s fourth quarter GDP growth came in at 1.9%, beating City expectations. The economy expanded 0.7% in the final three months of 2013, against a 0.5% contraction in the previous quarter. This brings growth for 2013 to 2.3%, year on year, a positive surprise. Yet a look at the growth breakdown reveals a less rosy picture; every sector of the economy shrank except for government spending. Growth appears to have been fuelled by higher government spending.
Though government spending helped the country finish stronger than expected in
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