Tech Disruption Drives Deals in Second Quarter

Average value per disclosed-value deal soared to an all-time record, including the dotcom bubble, according to the EY quarterly report.

E&Y and M&A

Technology disruption continues to accelerate as corporate technology buyers seeking broader solutions pushed deals in the second quarter of 2015 to a record $127.2 billion--higher than any quarter since 2000, and up 65 percent over the first quarter of the year.

The EY (formerly Ernst & Young) mergers and acquisitions (M&A) report also found that technology-enabled digital transformations disrupting multiple industries are in their infancy with more big-ticket transformative transactions anticipated.

Fifteen deals topped $1 billion, including three above $10 billion. The average value per deal, which even during the dotcom bubble never quite reached $400 million, soared to a new all-time high of $563 million.

It was megadeals by corporate tech buyers that fueled the biggest increase, as semiconductor and communications equipment companies positioned themselves for a foreseeable future of explosive growth in Internet of Things (IoT) devices, continued smart mobility expansion and the need for super-performing cloud data centers.

Private equity (PE) buyers posted the third-highest aggregate value in the eight years EY has produced these reports, with big data analytics topping the chart in average value per deal in the second quarter.

All categories of buyers, form corporate tech, non-tech and PE, contributed to record growth in 2Q15.

Cross-border (CB) aggregate deal value set a new quarterly record of $43.6 billion, up 257 percent year over year and 35 percent quarter over quarter.

Despite the value record, CB deal making took a lower than normal 34 percent share of all-deal value due to the number of bigger ticket in-border deals, the report found.

"Strategic technology deal drivers remained strong, especially security, but consolidation was the 2Q15 watchword," the report noted. "Transformative consolidation deals were done in semiconductors, communications equipment and other areas as tech companies sought scale and breadth to position for a future of ongoing digital disruption and associated explosive growth."

In terms of year to date (YTD) aggregate value, seven of the nine technologies are at least one-third ahead of their 2014 quarterly averages, and four have already surpassed their full-year 2014 value, including security, IoT, health care IT (HIT) and cloud and software as a service (SaaS).

At $127.2 billion, only one deal stands between 2Q15 and the all-time quarterly record for technology M&A aggregate value--the $160 billion AOL–Time Warner deal announced in the first quarter of 2000.

"The tech industry is transforming, fueled by cross-industry blur, IoT and digital transformations and enabled by universal cloud adoption and a growing need to add cyber security to a wide range of products and services," the report concluded. "It’s clear 2015 will be another blockbuster year for tech M&A."