PwC Report Finds Tech M&A Deals Continued at Rapid Pace in Q3 2017

A new study from global consulting firm PwC for the 2017 third quarter showed that IT industry mergers and acquisitions continued at a steady pace in the third quarter. The report, released Oct. 26, revealed that M&A activity within the hardware, internet and IT services sectors was strong, producing substantially more deals during the period than in the third quarter of 2016. However, deal values were down year over year and even private equity companies saw fewer M&A targets during the period. But even with this mixed report, PwC said it “remains positive” that the technology industry is poised for big things in the coming months. Read on to learn the details.

According to PwC’s data, there were 468 mergers and acquisitions in the U.S. technology industry during the third quarter. That was up 35 percent compared to the same period in 2016, and due in part to big moves in the hardware and internet market segments.

Although there were more deals during the third quarter, total deal value was lower than the same period in 2016. According to PwC, total U.S. deal volume hit $61.4 billion during the third quarter, 40 percent lower than the same period in 2016.

The third quarter of 2017 is following the broader market performance this year. With nearly 1,500 mergers and acquisitions so far in 2017, activity is easily outpacing the 1,100 deals made during the same period in 2016. However, total deal volume this year is hovering at about $126 billion, far behind last year’s more than $244 billion in value.

During the third quarter of 2017, Bain Capital’s investor group topped all deals with its $17.9 billion Toshiba semiconductor business acquisition. The second-biggest deal was Vantiv’s acquisition of UK-based payment processing company Worldpay Group, valued at $10.4 billion.

PwC discovered that smaller deals were numerous. In fact, deals of less than $100 million accounted for 45 percent of all activity last quarter, and those between $100 million and $500 million nabbed 40 percent share. Deals worth more than $1 billion only captured 9 percent share by volume.

According to PwC, the hardware segment generated the highest-value transactions during the third quarter. Although it attracted fewer than 50 deals, hardware was able to generate $20.9 billion in total deal cash volume. It easily outpaced all other market segments.

The internet sector took second place in total cash volume, at $16.4 billion. About 50 deals were completed during the third quarter, putting it ahead of the number of deals in the hardware segment, according to PwC.

IT services activity was substantially higher than hardware and internet, with total deals exceeding 100 during the period. However, at $12.4 billion, total IT services volume was well below the market leaders. Software came in fourth place, with $10.8 billion in deal volume on more than 250 deals.

PwC found corporate-to-corporate M&A activity in the U.S. was low during the third quarter. Total corporate acquisition cash values were $11.3 billion the third quarter, up from $4.9 billion the second quarter but far behind the $62 billion companies spent in the third quarter of 2016.

Those outside the technology industry continue to see value in investing in IT companies. Wireless and financial services companies were most active and particularly interested in acquiring companies in software and internet businesses. Non-tech buyers accounted for $20 billion of the $61.4 billion spent on technology companies during the period.