Dealmaking on track for 'blockbuster 2014' as technology M&A soars

- New post-dotcom records are set for deal value (US$73.7b) and volume (923 deals)

- All-time record for a single quarter tied with 19 deals above US$1b

- Cross-border deal value skyrockets, up 168% from 2Q14

Nov 13, 2014, 09:00 ET from EY

NEW YORK, Nov. 13, 2014 /PRNewswire/ -- According to EY's Global technology M&A update: July-September 2014, global technology M&A value and volume reached quarterly heights not seen since the dotcom bubble. These findings reflect the diverse influence of disruptive digital technology innovation across the global economy. The aggregate value of all disclosed-value deals set a new post-dotcom-bubble era highs of US$73.7b, up 41% sequentially and 4% year-on-year (YOY). At 923 deals in total, overall volume also set a record for any quarter since 2000, rising 6% sequentially and 31% YOY.

Diverse deal drivers jolt M&A to post-dotcom-bubble high
The third-quarter report noted a confluence of multiple technology-specific and macroeconomic drivers that pushed global technology M&A to its latest post-dotcom-bubble highs. The search for growth in an uncertain global economy led to eight big-ticket cross-border deals with targets in the US, where economic growth is considered more certain.

  • Consumer internet growth drove deals involving a range of related technologies, including online and mobile payments, social networking, gaming and e-commerce
  • Ongoing healthcare industry change in the US drove two big-ticket deals and many smaller deals
  • Online and mobile video technologies, whether for games, media and entertainment, business collaboration or consumer interaction, were heavily targeted

Corporate, cross-border deals drive records
Corporate dealmakers continued to drive the growth in the third quarter of 2014, particularly European and Asian buyers targeting US companies. Cross-border deal value soared 168% sequentially and 33% YOY to US$32.7b, after three consecutive declines. At 332 deals, cross-border volume was up 51% YOY and 7% sequentially. Overall, corporate dealmakers increased aggregate value 40% sequentially and 9% YOY to US$65.3b, and volume 33% YOY to 855 deals.

Volume in the Americas grew YOY, driven by the pervasive themes of cloud/SaaS and smart mobility, as well as big data analytics, healthcare IT (HIT), security and payments. Deal volume soared in Asia-Pacific and Japan (APJ) in 3Q14, driven by increased M&A activity in Australia, China and India. Aggregate value in APJ also rose strongly due to big-ticket deals targeting US companies. Companies in Europe, the Middle East and Africa (EMEA) focused on driving growth by acquiring US companies, which pushed EMEA volume and value to record levels.

Jeff Liu, Global Technology Industry Transaction Advisory Services Leader at EY, says:
"Technology corporate development teams stand today at the intersection of rapid, disruptive innovation induced by the five technology megatrends and global economy uncertainty that has caused a sudden increase in equity markets volatility. Megatrend-related innovation drove the strategic dealmaking that led to several technology M&A records in 3Q14, but prolonged volatility could slow or even stall M&A growth. We will keep a wary eye on volatility, but we are certain of this much: the innovation driving technology M&A growth is not slowing down."

Confidence is high among technology executives
Coinciding with the report launch, EY has also released its biannual Technology sector Capital Confidence Barometer (CCB), which 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. Moreover, according to the study, 83% of technology respondents expressed confidence in their own corporate earnings, well above the 77% average for all industries and a big jump from 64% in the April survey.

However, most telling were the M&A-specific results: 59% of technology respondents expect global M&A markets to improve in the next 12 months, and 40% expect M&A levels to remain at current levels. Moreover, the aggregate number of deals in respondents' pipelines increased dramatically from April to October, up nearly four times to 890 deals from 230. 

Looking ahead: technology M&A remains strong
EY's M&A report data shows a blockbuster year taking shape. Deal volume has grown for five consecutive quarters, and in 3Q14 set a post-dotcom-bubble record. Year to date aggregate deal value of US$192.7b is already higher than in any year after 2000. And while deals above US$1b get the most attention (they increased 29% YTD, to a total of US$129.4b from US$100b in 2013), we are encouraged even more by the widespread dealmaking strength emerging from analysis of deals valued below US$1b. YTD — they increased 54% to US$63.3b from US$41b for the same period in 2013.

Liu says:
"Global technology M&A is in motion — it is growing and setting records. And to borrow from Sir Isaac Newton, it will tend to stay in that motion unless some outside force slows it down."

View an infographic from the report and the full results online at www.ey.com/Technology

Notes to Editors

About EY

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This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

About the Global technology M&A update

The July-September 2014 issue is based on EY's analysis of the 451 Group M&A KnowledgeBase data for 2012, 2013 and 2014. Deal activity and valuations may fluctuate slightly based on the date the database is accessed. The full report is available at www.ey.com.

About EY's Global Technology Center

EY's Global Technology Center (GTC) is a network of 15,000 technology practice professionals from across our global member firms, all sharing deep technical and industry knowledge. Our high-performing teams are diverse, inclusive and borderless. Our experience helps clients grow, manage, protect and when necessary, transform their businesses. We provide assurance, advisory, transaction and tax guidance through a network of experienced and innovative advisors to help clients manage business risk, transform performance and improve operationally. Visit us at ey.com/technology and follow us on Twitter @EY_Technology.

Bakyt Azimkanov
EY Global Media Relations
+44 20 7980 0869
+44 77 8957 5383
bakyt.azimkanov@uk.ey.com

Michael Gallo
Gutenberg Communications
+1 212 239 8594
ey@gutenbergpr.com

SOURCE EY



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