Search for growth in social, mobile fuels tech M&A boom

Technology mergers and acquisitions reach post-dotcom records, and are expected to rise

The search for game-changing technology capable of fueling growth in an uncertain economy is driving global tech mergers and acquisitions to a level not seen since the dotcom era.

What's more, tech M&A is likely to increase, according to data from EA, the global professional services company formerly known as Ernst & Young.

Tech M&A centered around online and mobile payments, social networking, gaming and e-commerce in the last quarter, according to a report out Thursday from EA. Much of the activity appears to be driven by a desire to acquire disruptive technology.

Historically, tech M&A was driven by major vendors like Hewlett-Packard, Oracle and IBM trying to expand their reach by acquiring companies to consolidate and build on established tech product families, said Jeff Liu, Global Technology Industry Transaction Advisory Services leader at EY.

"Now it's disruptive technology that's in the crosshairs," Liu said. "Consolidation involves coporations needing to catch up in a way that they are not able to do fast enough orignaically."

The aggregate global value of all publicly disclosed-value deals set a new post-dotcom era quarterly high of US$73.7 billion [b], up 41 percent sequentially and 4 percent year over year. At 923 deals in total, overall volume also set a record for any quarter since 2000, rising 6 percent sequentially and 31 percent year over year.

Corporations, as opposed to private equity deals, continue to drive the growth, increasing aggregate value 40 percent sequentially and 9 percent year over year to $65.3 billion.

In EA global surveys of its clients, about 80 percent of respondents expected some sort of M&A to take place over the next four quarters, an all-time high for such polls, Liu said. This should translate into the current level of tech M&A rising by 25 percent, he said.

EA says there are five "megatrends" driving tech M&A: smart mobility, cloud computing, social networking, big data analytics and what it calls accelerated technology adaptation, defined as technology companies rapidly adapting to the needs of specific industries and other industries rapidly adapting to the evolving possibilities that technology enables.

Some of the biggest recent deals highlight these trends. For example, SAP in September said it it would buy business-travel and expense software vendor Concur for about US$8.3 billion, in a bid to continue growing out its portfolio of cloud-based applications. It was the largest deal of the quarter.

And in a $3.5 bilion deal announced in July, Zillow, the online service that brought big change to how properties are bought and sold, is buying Trulia, a site that has also disrupted the real estate market.

Though there is still uncertainty about the economy globally, EY's biannual Technology sector Capital Confidence Barometer (CCB), released alongside the M&A report, also points to a strong technology M&A outlook. Ninety-six percent of the 163 technology executives surveyed expressed confidence that the global economy is stable or improving. Eighty-three percent of technology respondents expressed confidence in their own corporate earnings.

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