It's fitting that 451 Research released a study on merger and acquisitions (M&A) on the same day CMSWire shared the news of yet another tech industry merger.
The new research shows that M&A will continue this year — even faster and more furious than in record-setting 2014.
Last year, about $439 billion was spent on tech acquisitions, the most since 2000. The two biggest deals: Comcast's acquisition of Time Warner for almost $70 billion to top the list in February and AT&T purchase of DirecTV Group for “only” $67.1 billion in May.
There were also a number of large M&As involving less well-known brands: Medical device giant Medtronic acquired Ireland-based Covidien plc in June, and Swiss-based building materials company Holcim bought French cement, construction and concrete supplier Lafarge.
Other big acquisitions include General Electric purchase of Alstom's energy assets for $17 billion and Oracle's $5.3 billion purchase of Sun Microsystems. One deal that didn't materialize?AstraZeneca rejected a $118 billion takeover from Pfizer, which would have easily been the largest M&A of 2014.
2015 appears likely to continue the deal-making momentum we experienced in 2014, which was the highest level of tech M&A spending since the Dot Com collapse,” said Brenon Daly, research director at 451 Research for M&A. “Tech investment bankers have told us that their pipelines are fuller than they've been in years, while corporate development executives indicated they expect to be even busier shopping this year,”
451 Research's report also stated that over half (58 percent) of corporate acquirers expected their own company to pick up the pace of making deals in 2015—the highest forecast in a decade.
Tech investment bankers are on alert as well. About 77 percent of investment banking survey respondents said that the aggregate value of tech transactions they are currently working on is higher than the previous year's value. This may be because smaller tech companies are looking to cash out on their products and services. WhatsApp was launched in 2009 with only $250,000 in seed money — and they were able to sell it to Facebook for a whopping $19 billion early this year (the acquisition is still underway as of this writing).
The 2015 M&A Outlook Report cited three drivers in key enterprise technology segments regarding M&A.
- The first was information security — customer demand will force vendors to expand their existing portfolios, and in some cases, that could mean a merger or acquisition.
- The second is mobility — Many people around the world own at least one mobile device, and growth is rapidly expanding in developing markets, so end-to-end enterprise mobility solutions that provide results on the go and continue to drive M&A activity.
- The third is cloud computing — physical servers are too expensive and prone to hackers, and cloud infrastructure will be necessary for acquirers to add high-value offerings on top of their current product lineup.
Other sectors that will also benefit from the increased M&A activity in 2015 include Enterprise Software, Networking, Storage and Systems, Hosting and Managed Services, Datacenter Technology and AdTech. The increased focus on mobile and cloud computing might help tech businesses get the most money for their acquisition, much like Facebook's buy of WhatsApp — and diversify the tech portfolio of an acquirer.