Technology Deal Activity Rebounds to 2012 Levels in Q3: PwC

Average deal value increased to $440 million, up from $253 million in the first quarter and $433 million in the second quarter of 2013.

Technology deals accelerated in the third quarter, returning to 2012 levels after a dismally slow start to the year, with deal volume and value doubling that of the previous quarter, according to PricewaterhouseCooper's U.S. Q3 technology deals insights report.

Average deal value increased to $440 million, up from $253 million in the first quarter and $433 million in the second quarter of 2013. Deal value during the third quarter totaled $27.7 billion, doubling that of the second quarter, with a total of eight transactions in excess of $1 billion closed.

Private equity activity is on the rise and is expected to continue at higher levels through the remainder of the year. The report found private equity funds directly acquired a total of five companies in the third quarter and backed an additional 12 companies with acquisitions through wholly owned portfolio companies or through divestiture of an existing portfolio business.

Software deal volume tripled that of the second quarter and climbed to levels equal to those of 2011 and the first quarter of 2012, with 24 transactions closed. Deal value increased 716 percent over the low value of deals in the second quarter, but was down 12 percent from a year ago.

Hardware volume increased 25 percent, while value increased 77 percent to $5.0 billion due to a series of transactions in excess of $500 million closed during the quarter, the report noted.

"After a struggling start in the first of half of 2013, the third quarter demonstrated robust growth in both volume and value of closed deals, to put technology M&A on an upward trajectory toward a strong finish to 2013," Rob Fisher, PwC's U.S. technology industry deals leader, said in a statement. "Additionally, there were a significant number of large deals announced during the quarter. Private equity funds are increasingly active in the technology sector, and with growth a constant focus for technology businesses, we anticipate the abundance of cash at home and overseas held by corporate acquirers to spur deals in the months and quarters to come."

The number of IT services deals doubled in the third quarter, and deal value increased 758 percent, driven by two deals in excess of $1 billion, while Internet transactions remained flat and total deal value dropped as the third quarter saw only one deal in excess of $1 billion closed.

"The significant technology deal announcements made during the third quarter provide ample reason to expect that the remainder of the year will be equally active as companies seek to close deals before year-end," Fisher said. "The increase in announcements, coupled with a rising trend in technology divestitures in the third quarter, is creating significant deal momentum which we expect to carry over into 2014 and drive higher technology deal volumes."

The report also noted that while semiconductor deal activity grew 160 percent with 13 transactions recorded during the third quarter, the lower average deal price resulted in transaction value eroding 4 percent to $4.3 billion.