Expect Tech M&A Activity to Explode

By Craig Galbraith Comments
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**Editor's Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2014.**

Following a first quarter that saw a big spike in tech merger activity, look for more of the same the rest of the year.

So say Morrison & Foerster and 451 Research in their biannual M&A Leaders Survey report.

Tech spending in Q1 2014 was triple the average recorded over the past five years. Survey respondents were more bullish on M&A than they’ve been in the past four surveys, the researchers reported. Nearly three out of four respondents said they will be ratcheting up their M&A activity through the end of the year. That's up from one in two last November. Only 4 percent expect deal activity to decrease.

If you thought the first quarter was big, that might be small potatoes. Seventy-two percent of those surveyed expect the torrid pace to quicken, or at least to continue. That would see the surge of transactions reaching a level not seen since the pre-recession boom years of 2006-07, when the sector hit $450 billion in total value. Dealmakers turned out almost $50 billion in deals in April alone.

"Think about it: Just six months ago, only 40 percent of industry insiders saw M&A spending reaching pre-recession levels by 2018," said Robert Townsend, co-chair of Morrison & Foerster's Global M&A Practice Group. "Now, nearly three-quarters of our participants expect to see 2006-07 levels reached this year. Clearly, there's been a sea change in sentiment. It's a very welcome development for the tech M&A community."

Among the major tech mergers in the past year that the companies noted: SoftBank's $21.6 billion acquisition of Sprint and Sprint's subsequent acquisition of Clearwire; Cisco's $2.7 billion acquisition of cybersecurity solutions firm Sourcefire Inc.; VMware's $1.54 purchas of AirWatch; and Intel's $740 million investment in Cloudera.

The survey also revealed that a large majority expects current high valuation levels to persist or continue to climb; and more than half of respondents believe the maturing of the tech industry will put upward pressure on the M&A market, while just 9 percent foresee downward pressure.

More than 150 C-suite officers, business development executives, corporate counsel, investment bankers, venture capital and private equity investors across the technology industry took part in the survey.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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