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July 31, 2013

Technology sector merger and acquisition value rises 34% in Q2

Cumulative deal value reached $13.9bn but number of deals drops on total in first quarter.

By CBR Staff Writer

Technology sector transaction value grew by 34% during the second quarter of 2013, but the volume dropped by 22% compared to the first quarter, according to PwC.

The accounting firm’s latest report revealed that about 32 deals were completed during the quarter, compared to 41 deals during the first quarter.

During the second quarter average deal value reached $433 million, as the number of deals exceeding $250m doubled from 17% to 34%, while cumulative deal value reached $13.9bn, which included five transactions surpassing $1bn.

PwC technology industry deals leader Rob Fisher said that technology companies face a constant conundrum of a need to balance key investment initiatives while navigating fears of future downturns amid signs of positive economic growth.

"While the number of closed technology transactions declined in the second quarter, new deal announcements point to robust M&A (merger and acquisition) activity for the rest of 2013 as technology businesses plot their next wave of transactions," Fisher said.

Positive market performance fuelled technology initial public offerings (IPO), according to the report, due to a double rise in new pricings, with proceeds surpassing $2.6bn.

New IPO registrations reached a total of 13 for the quarter, with several others filed confidentially under the rules of the US JOBS Act.

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The hardware sector involved eight transactions, whose combined deals value reached $2.9bn, while the software sector dropped 62% to eight deals, with value dropping 73% to $1.5bn, representing a decrease of 60% and 55% on volume and value respectively.

The quarter also witnessed six internet deals that generated $4.5bn, while the semiconductor sector saw five deals and closed transactions valued at $4.5bn, representing 32% of overall deal value for Q2.

The IT services sector accounted for five transactions and contributed 3% of deal value at $452m for transactions closed during the period.

However, PwC anticipated that the decline in software transactions would be temporary as cloud, social, mobile, data analytics and the software tools would continue to capture the market.

"With increased momentum among private equity buyers, significant unused corporate cash on hand, and more technology companies moving to fully embrace cloud and capture an increasing share of mobile consumers, the fundamental drivers of technology remain strong," Fisher said.

"As technology players identify new avenues to fuel growth, we anticipate the rise in proposed transactions will invigorate technology M&A for the remainder of 2013."

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