After some recent large mergers and acquisitions in the tech sector – such as Facebook taking over WhatsApp for $19 billion – there is increasing speculation that major tech deals could continue as this year moves forward. In addition, the recent large number of tech IPOs is likely to continue in 2014.
As of Feb. 20, tech mergers so far this year totaled $42 billion, according to NBC News, which is an impressive number.
“M&A is playing an instrumental role for larger technology enterprises seeking to achieve growth," Rob Fisher, PricewaterhouseCoopers’ (PwC's) US technology deals leader, explained in a statement. "The abundant cash and marketable securities held by the top 25 technology companies at year end, and the record levels of capital being raised by private equity funds, is creating a tremendous atmosphere for technology M&A in 2014."
Yet, PwC predicts there will be “subdued levels of large platform acquisitions” during 2014.
The value of tech deals in 2013 totaled $99.8 billion, PwC said. Total deal volume dropped 18 percent with 204 closed transactions in 2013 compared to 249 closed transactions in 2012. But a jump in billion-dollar deals led to average deal size increasing from $415 million in 2012 to $489 million in 2013. Also, tech IPOs were 16 percent of IPO value and 21 percent of IPO volume in 2013 and PwC predicts “continued growth” in tech IPOs. During 2013, there were 51 IPOs, compared to 39 in 2012.
Software was 35 percent of tech M&A volume in 2013. As tech companies expand into the cloud, there is more mobility and more companies are using big data analytics. With hardware, the volume of transactions dropped 22 percent between 2013 and 2012. Cumulative deal value jumped by 37 percent. Semiconductors were 16 percent of overall tech transaction volume with 33 deals. The cumulative deal value was $10.7 billion during 2013. That is 32 percent more than seen in 2012. Also, IT services saw a 10 percent jump in volume and 32 percent increase in value – with 34 deals closed. And PwC reports that in 2013 private equity deal volume dropped for the first year since 2009 – during 2013. Private equity deals were 31 percent of total tech deals in 2013 compared to 34 percent in 2012.
"2014 appears to have strong fundamentals for an increase in private equity deals... We expect the trend of more private equity investments in the form of growth investments and add-on acquisitions to continue," Fisher said.
"User experience, new revenue models and process efficiencies will be at the heart of what technology companies want to accomplish with deal activity in 2014. The underlying theme is to enable intelligence for everything across industries," Fisher added.
Overall in the U.S. M&A market, Comcast announced it will acquire Time Warner Cable for $45.2 billion and Actavis wants to acquire Forest Laboratories for $25 billion. As of last year, there was over $1 trillion of overall M&A activity in the United States. That represents the most since 2007.
Looking ahead, PwC says that some of the drivers for tech deals this year include: big data; building social, mobile and cloud platforms; software-defined networking; industrialization of hardware; local and social software; sensor technology; mobile applications; industry specific solutions in health care, retail, banking, and industrial products; security concerns; and interface technologies as well as endpoints.
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