With a strong finish in technology deal activity in 2013, the outlook for 2014 points towards an accelerated pace as technology mergers and acquisitions (M&A) continues to play a critical role for companies across industries to innovate and drive growth, according to analyst firm PricewaterhouseCoopers’ (PwC) US Technology Deals Insights 2013 Year in Review and 2014 Outlook report.
According to the report, cumulative technology deal value for 2013 closed at $99.8 billion, a decrease of three percent from 2012, with a blossoming initial public offering (IPO) market and growing valuations impacting mid-market deal volumes, while overall value for the year was upheld by deals larger than $500 million.
The report found total deal volume declined 18 percent ending the year at 204 closed transactions in 2013 compared to 249 deals closed in 2012. The increase in billion dollar deals resulted in average deal size increasing from $415 million in 2012 to $489 million in 2013, according to PwC.
"Disruptive technologies are driving change at a dizzying pace, heightening the need for continuous innovation. M&A is playing an instrumental role for larger technology enterprises seeking to achieve growth," Rob Fisher, PwC’s US technology deals leader, said 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."
Technology IPOs accounted for 16 percent of IPO value and 21 percent of IPO volume in 2013 and PwC anticipates continued growth in the technology IPO pipeline. In total, there were 51 IPOs, a substantial increase from 39 in 2012.
However, despite the continued availability of cheap high yield and leveraged financing, and buoyant equity markets, private equity deal volume declined for the first time since 2009.
The report found private equity deals comprised 31 percent of total technology deals with disclosed values in 2013 compared to 34 percent in 2012.
Software, accounting for 35 percent of technology M&A volume in 2013, remained at the forefront of technology deals as technology companies continue to expand into the cloud, mobility continues to grow, and more companies across industries leverage big data analytics.
"2014 appears to have strong fundamentals for an increase in private equity deals. However, competition between financial and strategic buyers for high quality assets remains strong," Fisher continued. "Given the inherent ability of strategic buyers to justify higher valuations from synergies, we expect the trend of more private equity investments in the form of growth investments and add-on acquisitions to continue."