Social Media, Cloud Fragmentation Driving Tech MandA: PwC Report
Positive spending growth, large cash balances and a predisposition toward mergers and acquisitions are likely to keep the technology industry in the top spot for M&A activity in 2012, according to the latest report from PwC.
Innovation and time-to-market concerns continue to fuel M&A activity in the tech sector, according to PwC's "2012 U.S. Technology M&A report," which provides an analysis of 2011 tech deals and the outlook for 2012. The study cited increased activity among tech companies buying up players in the fragmented cloud and social media markets, which have moved to center stage with announced and completed initial public offerings (IPOs).
While spending forecasts have been reduced, the technology industry has generally bucked the negative trends the majority of industries have experienced in the last few years. Despite the unease in the stock market, profitable tech businesses managed to sock away cash during the year, increasing the coffers of the top 20 U.S. technology companies to more than $300 billion in cash and marketable investments by year's end, more than the total transaction value of closed technology deals in the last three years combined, the report said.
Shortly after the close of 2011, IT research firm Gartner lowered its 2012 technology spending forecast to 3.7 percent, and analytics specialist Forrester followed suit, with a forecast of 5.2 percent. Gartner and Forrester estimates for technology spending in 2011 totaled 6.9 percent and 9.7 percent, respectively.
The decrease in anticipated IT spend in 2012, just over half that of 2011, provides an interesting view of growth in technology businesses in the coming year, PwCs report said.
During the year, the market witnessed the public offerings of Groupon, Zynga, LinkedIn, Pandora and other tech-focused businesses. While overall IPO filings declined in terms of volume and value from 2010 to 2011 due to market volatility during the year, key technology players have not completely written off IPO ambitions. Not long after year-end, came the much-anticipated announcement of Facebook's IPO filing, which is expected to be one of the largest technology IPOs in history.
In addition, PwC noted that several companies announced major changes in 2011, which might signal more transitions to come. For example, Google announced an entrance into the mobile handset market in a big way, with the acquisition of Motorola Mobility.
In another significant shift last year, Hewlett-Parked announced the spin-off of its Personal Systems Group (PSG) business; HP later canceled the plan, and this month announced that it would combine its PSG and printer businesses.
We expect a continuation of shifts in strategic direction resulting in sizable acquisitions in the coming year, the PwC report said.
With nearly 2 billion Internet users across the globe, the volume of data (both structured and unstructured)in the form of emails, tweets, blogs, instant messages, videos, photos and Web pagesis growing exponentially. Information collected through social media platforms, Websites and mobile providers has the potential to provide businesses with details about consumer demographics and interests like never before.
Businesses that can provide the software tools to collect, organize, analyze and summarize findings from this data will become highly relevant in the near term and likely targets for a variety of businesses looking to put big data to work, the report said.