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Global technology M&A value declines 35 per cent in 2012

The aggregate value of technology mergers and acquisitions (M&A) declined 35 per cent worldwide in 2012 to USD114.1bn from USD175.7bn in 2011, according to Ernst & Young's Global technology M&A update.

Deal value in 4Q2012 was USD29.4bn, down four per cent year over year (YOY) from USD30.5bn in 4Q 2011.

Nearly the entire full-year decline came from deals above USD1bn in value. For example, the largest deal of 2012 would have placed fifth in 2011 and only two 2012 deals would have made it onto the 2011 top 10 list. Companies were hesitant to engage in large, transformative, technology deals because the uncertain macroeconomic environment increased many risks, particularly the risk of an incorrect valuation as equities markets fluctuate and buyers believe many company values remain high.

Deal volume held steady, however, as companies continued to engage in smaller, more strategic deals driven by technology megatrends that are generating transformative innovation in technology and leading to technology-enabled innovation in other industries. These megatrends include smart mobility, cloud computing, social networking, big data analytics and accelerated adaptation, as technology companies rapidly adapt to the needs of specific industries and other industries rapidly adapt to the evolving possibilities that technology enables.

Both corporate and private equity (PE) deal-making declined. The aggregate disclosed value of PE deals declined by nearly half (down 47 per cent), to USD18.5bn in 2012 from USD34.8bn in 2011. Aggregate value of corporate deals declined 32 per cent to USD95.6bn in 2012 from USD140.9bn in 2011. The average value of deals that had disclosed values was USD188m, down 14 per cent from USD218m in 2011.

Joe Steger, global technology industry, transaction advisory services leader, at Ernst & Young, says: "The macroeconomic pressures that returned in late 2011 held down global technology M&A activity in 2012. But, that pressure also helped clarify what's important. We saw growth in the strength of transformative megatrends — social-mobile-cloud, big data analytics and accelerated adaptation — while the really big-ticket deals pulled back. Heading into early 2013, the short-term outlook suggests a soft couple of quarters but the long-term outlook for technology M&A remains strong, as both technology and non-technology industries have an ongoing need to adapt to disruptive technology innovation."

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