Tech Industry Mergers and Acquisitions Market Gains Steam

Overall, the second quarter ended with 62 transactions completed, mirroring the first quarter and continuing the momentum of 2013’s second-half surge.

IT management and M&A

The number of technology transactions rose in the second quarter of 2014, increasing 87 percent over the second quarter of last year, while a total of four transactions in excess of $1 billion closed, according to a report from PricewaterhouseCoopers (PwC).

The software sector remains at the forefront of deal activity but has traditionally been comprised of smaller deals.

At 20 transactions closed with an aggregate deal value of $4.1 billion, volume grew 18 percent while value declined 44 percent over the first quarter.

Compared to the second quarter last year, deal volume increased 150 percent and value increased 163 percent.

Overall, the second quarter ended with 62 transactions completed, mirroring that of the first quarter and continuing the momentum of 2013’s second-half surge.

With the 62 transactions totaling $26.7 billion, average deal value totaled $430 million, a slight increase from $406 million in the first quarter, and down from $510 million average over the last 12 months.

"We're also seeing some convergence between the software and Internet sectors, as mobile, social and cloud remain in the foreground of tech sector growth," Rob Fisher, of PricewaterhouseCoopers, told eWEEK. "While a few years back we saw a number of software deals that focused on cloud platforms, many of the larger software deals, as of recent, appear to target expanding product offerings through industry specialized solutions."

Despite the recent trends in hybrid business models adjoining software and Internet companies, second quarter internet deal activity reflected more transactions focused on traditional e-commerce deals with 15 transactions closed.

The average deal value for the hardware sector increased to $866 million from $496 million in the first quarter with 11 closed transactions, with volume down 8 percent and value up 60 percent.

Meanwhile, IT services volume remained flat with nine deals closed and values that grew 10 percent, resulting in an increase in average deal value from $278 million to $305 million.

"The first half of 2013 was a notably slow period in technology M&A, but we've seen an increased and relatively stable level of deal activity for the past year now," Fisher said. "While there was a great deal of economic uncertainty during the first half of 2013, much of that has mitigated amongst improving macroeconomic signs on a more global basis."

Fisher noted the equity markets surged in 2014, creating more exit opportunities for would-be sellers, which challenged deal volumes from surging over the same period as valuation gaps between buyers and sellers became more readily apparent.

Speaking more broadly, Fisher said he is seeing lots of acquisitions that are additive to strategic buyers’ portfolios, aimed to increase their competitive advantage in the market, such as specialized industry software.

"Some of the larger players have hesitated from large and transformational platform transactions, but as the larger technology companies continue to mature, we may see additional headlines of this nature as well," Fisher said.