NEW YORK, May 21, 2013 /PRNewswire/ -- The aggregate value of all disclosed value deals grew 58% year-on-year (YOY) to US$36.4b, according to Ernst & Young's Global technology M&A update: January – March 2013. Deal volume fell 12% YOY and 5% compared with the previous quarter to 661 deals. Aggregate disclosed value would have fallen by 48% if not for a single announced technology transaction valued at US$24.4b (Silver Lake Partners and Dell Inc. as announced on Feb. 5, 2013).
However, even the large deal values reflected the profound challenges of transforming a strong, well-established company to align with the five disruptive innovation "megatrends" – smart mobility, cloud computing, social networking, big data analytics and accelerated adaptation. The report found that these megatrends influenced the microcosm of global technology M&A's in Q113, as companies competed for market share and key technologies.
Corporate and private equity (PE) volume declined 12% and 13% YOY, respectively. However, PE volume increased 31% compared with the previous quarter to 46 deals, while corporate declined for the second consecutive quarter, by 7% to 615 deals.
Joe Steger, Ernst & Young's Global Technology Industry, Transaction Advisory Services Leader, says:"Macroeconomic pressures continued to hold down global technology M&A activity in Q113. We see gradual improvement in macroeconomic uncertainty and a near-term narrowing of valuation gaps as positive signs. However, there is still a lack of confidence around doing large deals in the current economic conditions." The report identifies the following deal drivers:
- Mobile apps drive many small deals: There were nearly 60 deals in Q113 for mobile applications or related development technology. Most were small or had non-disclosed values. These deals typically involved software that gathers users' reviews on a topic (food, restaurants, movies, travel destinations, etc), then analyzes the content and makes recommendations to others, or both.
- Average deal value falls sharply: Concerns over conducting large transformative deals dominated the M&A landscape in Q113. Excluding the announced deal to take Dell private valued at US$24.4b, average value would be US$103m, down 36% YOY and 47% respectively.
- Megatrends act together to transform industries: Social-cloud and big data analytics technologies began acting together to transform entire industries. For example, Q113 saw dozens of deals for mobile apps that generate social-network-based recommendations for users. In the background there were many deals for technologies to help network operators manage better the associated data traffic deluge. In the middle were e-payment or advertising and marketing deals. Sprinkled throughout were deals for big data analytics technologies to improve the accuracy of recommendations, the optimization of advertising and marketing campaigns and the efficiency of data networks.