Technology M&A value falls 52 per cent on weakened global economy
The aggregate value of technology mergers and acquisitions (M&A) fell 52 per cent year-on-year (YOY) and 15 per cent compared with the previous quarter to USD28.2bn in the third quarter of 2012, according to Ernst & Young's Global technology M&A update.
Large M&A transactions gave way to smaller, more strategic deals, as companies proceeded cautiously in light of continued, widespread macroeconomic uncertainty.
In particular, the total volume of announced deals in 3Q12 was 752, up two per cent YOY and three per cent sequentially (on 2Q12). Strategic transactions continue to be driven by five long-term megatrends that are generating disruptive innovation in technology and leading to technology-enabled innovation in other industries. These megatrends are smart mobility, cloud computing, social networking, big data analytics and a growing sense of blur and convergence as technology sectors come together and the technology industry enters other industries as enabling innovation.
Notably, corporate and private equity deal volume moved in opposite directions: corporate was up four per cent both YOY and sequentially to 701 deals in 3Q12, while PE declined 22 per cent YOY and two per cent sequentially to 51 deals in 3Q12.
The study also found that the volume and value of cloud/software as a service deals remained significantly higher than any other deal driver in the third quarter. Mobile/e-payment technologies surged in value during 3Q12, and deal value surged again for health care information technology after falling in 2Q12. Social networking deals fell in value, but held steady in volume.
Joe Steger, global technology industry, transaction advisory services leader at Ernst & Young, says: "Once again, the macroeconomic environment is challenging technology M&A. But unlike after the global downturn that began in late 2007, when deal values and volume both fell hard and fast, volume continues to grow — at least a little."
"This is a real testament to the spreading strength of the 'social-mobile-cloud' and big data analytics megatrends. These are major forces and they are still driving technology company transactions. So, we'll continue to see many smaller strategic technology deals, and caution around executing large transformative deals until macroeconomic conditions and confidence improve. But the long-term outlook for global technology M&A remains strong."
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