In high-tech “disruptive” is a good thing. Disruption was the driving force behind the majority of the high-technology mergers and acquisitions in the first half of 2015, with acceleration in deal-making during Q2.
Corporate technology buyers pushed 2Q15 deals to a record $127.2 billon, which is higher than any quarter since 2000 and up 65 percent over 1Q15, according to EY’s latest report. In addition, the report finds that technology-enabled digital transformations disrupting multiple industries are in their infancy with more big-ticket transformative transactions anticipated.
Megadeals by corporate technology buyers fueled the biggest increase, as semiconductor and communications equipment companies – Avago/Broadcom; NXP/Freescale, Intel/Altera to name a few -- 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, according to EY.
Strategic technology deal drivers remained strong (especially security), but consolidation was the 2Q15 watchword. Average value per disclosed-value deal did soar to an all-time record, including the dotcom bubble. PE buyers posted the third-highest aggregate value in the eight years EY has produced these reports. Notably, big data analytics topped the chart in average value per deal in 2Q15 on the strength of the largest technology take-private deal so far this year.
The report finds that all categories of buyers — corporate tech, non-tech and private equity (PE) — contributed to record growth in 2Q15. However Jeff Liu, Global Technology Industry Leader, Transaction Advisory Services at EY, in a release says: "We'll see more megadeals in response to disruptive technology and cross-industry 'blur.' Such deals position tech buyers with end-to-end solutions to address the explosive growth in IoT devices, continued smart mobility expansion and the growing need for high-performance cloud data centers to manage the computing load required by this rapidly arriving future."
- 2Q15 aggregate value of disclosed-value deals hit $127.2 billion, up 65% sequentially (over 1Q15's post-dotcom bubble record) and 142% year-over-year (YOY).
- 15 deals topped $1 billion, including three above $10 billion.
- 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.
- Quarterly deal volume inched above 1Q15 to set a sixth consecutive post-dotcom-bubble record of 1,104 deals.
- Strategic technology deal drivers remained strong (especially security), but "consolidation" was the 2Q15 watchword.
- Cross-border aggregate deal value set a new quarterly record of $43.6 billion, up 257% YOY and 35% sequentially
Looking ahead: robust dealmaking expected
In 1Q15, non-tech buyers drove the growth. This time, all buyer types posted big numbers. 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 cybersecurity to a wide range of products and services. It's clear 2015 will be another blockbuster year for tech M&A.