NEW YORK, 11 MAY 2016. Following record-setting levels in 2015, global technology M&A volume rose 8% sequentially and 2% year over year (YOY) in the first quarter of 2016, to 1,002 deals, according to EY’s Global technology M&A update: January-March 2016. However, quarterly value fell 65% sequentially and 14% YOY. In spite of falling numbers, the quarter still ranked among the top 10 highest-value quarters at US$66.7b.
Seven of the ten deal-driving trends were led by big data analytics (up 82% in YOY value and 72% in YOY volume). The volume of dealmaking in the following categories also had YOY increases: internet of things (up 22%), health care information technology (up 19%), cybersecurity (up 9%) and advertising and marketing (up 9%). These categories represent technologies that are disrupting non-tech industries like manufacturing, automotive, health care and media.
Jeff Liu, EY’s Global Technology Industry Leader, Transaction Advisory Services, says:
“Digital disruption is not standing still for global economic uncertainty and neither is global technology M&A. Big data analytics is a perfect example as tech and non-tech companies alike seek new data sources to feed their analytics capabilities, especially where machine learning technologies are involved. We expect the waves of M&A and new partnering trends to continue.”
Additional highlights from the EY Global technology M&A update: January-March 2016
u China’s deal volume doubled to 34 deals in 1Q16. Its aggregate disclosed value of US$15.1b was up 287% from US$3.9b in 1Q15, representing 23% of global value and 52% of APJ regional value.
u The number of non-tech companies buying technology companies rose 26% YOY to 147 deals, in contrast to the 5% YOY decline in the volume of corporate tech buyers, at 763 deals.
u After a slight dip in 4Q15, divestitures rose again to more than 150 deals in 1Q16. Three rose above US$1b, including two targeting IT services business units at US$5b and US$3.1b, respectively.
u 1Q16 volume of private equity (PE) deals was up 61% YOY and 31% sequentially, ranking as the second-highest PE volume ever recorded. However, at US$7.5b, the quarter’s aggregate PE value was down 60% sequentially and 3% YOY.
Equity market turmoil and the increasing difficulty of obtaining debt appeared to have limited impact on global technology dealmaking in the first quarter of 2016. This assessment is shared by EY’s latest Global Capital Confidence Barometer (CCB) – Technology report released last month, which points to stability for the year ahead. According to the CCB report, 43% expect technology M&A to remain stable and 52% expect it improve. Six months ago, however, 80% projected growth.
Liu says, “The latest CCB paints a picture of challenging times and the shift away from projected growth is large. Yet, there are no signs of a downturn in tech. We are coming off the back of a couple of record-breaking years and continued growth at the same levels could prove to be unsustainable. If technology dealmaking stabilizes at the 2014 and 2015 blockbuster levels, 2016 should prove to be a very exciting year.”
To view a full copy of the EY Global technology M&A update: January-March 2016, visit: ey.com/GL/en/Industries/Technology/ey-global-technology-mergers-and-acquisitions.
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About the EY Global technology M&A update: January-March 2016
The January-March 2016 issue is based on EY’s analysis of The 451 Group M&A KnowledgeBase data. Deal activity and valuations may fluctuate slightly based on the date the database is accessed. The full report is available at ey.com/GL/en/Industries/Technology/ey-global-technology-mergers-and-acquisitions.