Big data analytics became a significant deal-driving trend in 2016 merger and acquisition activity as companies sought new data sources to feed their analytics capabilities.
2016 has seen record-setting levels of activity in global technology M&As with volume rising 8% sequentially and 2% year over year rise in the first quarter of 2016 to 1,002 deals. However, despite the increased activity, quarterly value fell 65% sequentially and 14% YOY.
Despite the falling numbers, the quarter still ranks among the top 10 highest-value quarters at $66.7bn, according to EY’s Global technology M&A update: January-March 2016.
Significantly, it was found that seven of the ten deal-driving trends were led by big data analytics which was up 82% in YOY value and 72% in YOY volume. Jeff Liu, EY’s global technology industry leader, transaction advisory services, said: "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."
UK companies were particularly active, accounting for 40% of EMEA deal volume and 14% of value, with US companies proving to be key targets for UK companies. US companies were targeted in 22% of deals by UK buyers and accounted for 73% of UK acquired value.
The area of big data analytics though wasn’t alone in seeing an increase in activity, with the internet of things up 22%, health care information technology rising 19%, cyber security up 9%, and advertising and marketing increasing 9%. These categories represent technologies that are disrupting non-tech industries like manufacturing, automotive, health care and media.
Frequently the deals to acquire tech companies across these areas is carried out by other tech businesses, however, this report shows a 26% rise YOY from non-tech companies buying. This increased the number of deals to 147 and while it is remains significantly lower than the volume of corporate tech buyers, at 763, there has been a gradual shift with this volume declining by 5% YOY.
Interest in private equity funding in Q1 2016 remained high despite market turmoil with volume of deals up 61% YOY. However, the aggregate private equity value fell substantially by 60% sequentially and 3% YOY.
The report says that market turmoil and the increasing difficulty of obtaining debt appeared to have limited impact on global technology deal-making in the first quarter of 2016.
EY suggests that this points to relative stability for the year ahead with the Global Capital Confidence Barometer report showing that 43% expect technology M&A to remain stable and 52% expect it to improve. This does paint a picture of reduced expectations though as six months ago 80% projected growth.
Liu said: "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 deal-making stabilizes at the 2014 and 2015 blockbuster levels, 2016 should prove to be a very exciting year."