Google, Microsoft, HP Lead Surge in Tech Acquisitions Spending: Report

The significant transactions of the past year included Google, looking to bolster its mobile business through both hardware and patents.

Led by multibillion-dollar strategic deals from Hewlett Packard (NYSE: HPQ), Google (NASDAQ:GOOG), Microsoft (NASDAQ: MSFT), SAP (NYSE:SAP), Texas Instruments (NYSE:TXN) and others, technology acquirers increased mergers-and-acquisitions spending for the second year in a row, according to IT analytics firm 451 Research.

Acquirers spent $219 billion to purchase 3,690 IT, telecommunications and Internet companies around the world last year, a 17 percent increase in spending and a 13 percent increase in number of deals from 2010. The total deal count hit its highest level since 2006, as M&A activity continues to dig out from its downturn in the recession of 2008-2009.

"The fact that deal-makers managed to generate an increase in spending last year is remarkable given the turmoil that has shaken the financial markets since summer," said Brenon Daly, research director for M&A at 451 Research. Daly noted that just two of the 10 largest deals of 2011 came in the final four months of the year, when concerns about Europe's debt crisis reached their highest point.

Much of the increase in activity in 2011 can be explained by growth in acquisitions outside of North America as U.S. buyers increased their cash outlays for international targets. M&A spending on non-North American targets increased 48 percent year-over-year while the number of deals increased 28 percent.

Private equity firms did little to contribute to the increase in spending, the report noted. While the total number of private-equity-sponsored transactions increased by 44 percent in 2012, their total outlays increased only seven percent from the prior year level, accounting for 14 percent of the past year's tech spending, a couple of percentage points less than financial buyers represented in 2010. In fact, there wasn't a single private equity transaction among the 10 largest deals of 2011 - the first time that has happened since 2008.

The significant transactions of the past year included Google, looking to bolster its mobile business through both hardware and patents, which paid $12.5 billion for Motorola Mobility and spending more than it has spent, collectively, on the more than 100 deals it had announced up to the point. In early December, SAP inked the largest software-as-a-service transaction ever, spending $3.65 billion to acquire human capital management software vendor SuccessFactors.

HP, looking to jumpstart its software business, paid a "startlingly high" premium to take home British information management vendor Autonomy. The $11.7 billion price tag represents the largest software deal in seven years, but also contributed to the ouster of the architect of the deal (Leo Apotheker) after less than a year as HP's chief executive. Texas Instruments' $6.5 billion acquisition of National Instruments stands as the largest semiconductor deal yet by a strategic buyer. Microsoft's $8.5 billion purchase of Skype marked the software giant's largest acquisition.

Tech M&A professionals expect deal growth to continue in 2012, according to recent surveys of M&A professionals by 451 Research. In the surveys, completed in early December, 56 percent of corporate acquirers and 67 percent of senior investment bankers said they expect to see an increase in technology M&A this year. Further, when asked about the overall climate for M&A in 2012, three times the number of corporate development executives projected that it would get better rather than worsen (43 percent vs. 14 percent).

"Without a doubt, the ongoing economic turbulence in Europe is creating a number of headwinds for deal-makers right now," Daly said. "To get a deal done, buyers need both currency and confidence. While most tech companies have record levels of cash to spend, the outlook for the companies they can spend it on is fairly murky. That's causing some buyers to hold off on acquisitions. And so far, European leaders have done precious little to restore confidence, much less resolve the crisis."