Despite Deal Volume Shrinking to 2009 Levels, Second Quarter Deal Announcements Indicate Rising Technology M&A Activity, Says PwC US

Private Equity Buyers Play Active Role with Largest Deals Announced this Year

Jul 30, 2013, 09:00 ET from PwC US

SAN JOSE, Calif., July 30, 2013 /PRNewswire/ -- While closed technology transactions in the second quarter declined both sequentially and year-over-year, the increase in announced and rumored deals point to a rise in merger and acquisition (M&A) activity for the remainder of the year, according to PwC's US Q2 technology M&A Insights report released today. Private equity (PE) buyers took a more active role in technology M&A with deals announced across the spectrum of deal size, including some of the largest transactions announced so far this year.

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In the second quarter of 2013, PwC found that technology sector transaction volume decreased 22 percent while value increased 34 percent from the first quarter of 2013. The second quarter ended with 32 transactions completed, compared to 41 deals in the first quarter.  Average deal value increased to $433 million from first quarter's average of $253 million as the number of deals in excess of $250 million doubled from 17 percent to 34 percent. Second quarter cumulative deal value reached $13.9 billion, including five transactions in excess of $1 billion, still below the average quarterly deal volume in 2012, but higher than the three closed in the first quarter.

"Technology companies face the constant conundrum of a need to balance key investment initiatives while navigating fears of future downturns amid signs of positive economic growth," said Rob Fisher, PwC's U.S. technology industry deals leader. "While the number of closed technology transactions declined in the second quarter, new deal announcements point to robust M&A activity for the rest of 2013 as technology businesses plot their next wave of transactions."

The report finds that positive market performance has continued to fuel technology IPOs, as the volume of new pricings more than doubled in the second quarter compared to Q1 of 2013 to 15, with proceeds in excess of $2.6 billion.  New publicly announced IPO registrations continued, totalling 13 for the quarter and a number of additional registrations confidentially filed under the rules of the US JOBS Act.

The low volume of second quarter transactions was spread across technology sectors, with hardware deals comprising a quarter of all deal activity with eight transactions totalling $2.9 billion in deal value.   

  • The software sector, a historic driver of technology M&A throughout 2012 and the first quarter of 2013, decreased 62 percent to eight deals and value dropped 73 percent to $1.5 billion (11 percent of deal value) in the second quarter of 2013. This decline represents a decrease of 60 percent and 55 percent on volume and value, respectively, from the second quarter of 2012.
  • Six Internet transactions closed in the second quarter, generating $4.5 billion (33 percent of total deal value).
  • The semiconductor sector generated five deals (16 percent of total deal volume) and contributed to the second highest deal value during the second quarter with $4.5 billion of closed transactions, or 32 percent of total deal value for the quarter.
  • IT services accounted for five transactions (16 percent of total deal volume) and contributing just three percent of deal value at $452 million for transactions closed during the second quarter.

PwC anticipates the drop in software transactions to be temporary as cloud, social, mobile, data analytics and the software tools that enable these technologies will continue to drive markets and enable efficiencies in non-technology industries.

"With increased momentum among private equity buyers, significant unused corporate cash on hand, and more technology companies moving to fully embrace cloud and capture an increasing share of mobile consumers, the fundamental drivers of technology remain strong. As technology players identify new avenues to fuel growth, we anticipate the rise in proposed transactions will invigorate technology M&A for the remainder of 2013," added PwC's Fisher.

PwC's US technology M&A Insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $15 million, as provided by Thomson Reuters through June 30, 2013, and supplemented by additional independent research.  Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  

Our local and global deal strength is derived from over 1,400 deal professionals in 21 cities in the U.S. and over 9,800 deal professionals across a global network of firms in 75 countries.  In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.  

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