Technology Deals Market on Pace to Become Strongest in Years, Says PwC Deals Practice

SAN JOSE, Calif., Oct. 30, 2014 /PRNewswire/ -- While momentum continues apace with slightly fewer but larger deals, the third quarter experienced an unprecedented series of spin off announcements from technology titans that signal fundamental competitive shifts, according to PwC's U.S. Q3 technology deals insights report, released today. Healthy valuations, built-up cash reserves and the ability to leverage equity enabled strategic buyers to lead the way, while private equity remained active on both the buy and sell side.

In the third quarter of 2014, PwC found that the number of technology transactions continued steadily. With 64 transactions totalling $30.1 billion, average deal value totalled $470 million, a 19 percent increase from $396 million in the second quarter, and down from the $499 million average over the last twelve months. In comparison to the third quarter of 2013, when deal activity resurged after a dismal start to 2013, transaction volume remained relatively flat while deal value grew eight percent. There were eight deals in excess of $1 billion during the third quarter, a slight increase compared to an average of six per quarter during the last 12 months.

"Our third-quarter analysis sets 2014 at a pace to become the second most active year in technology deals since the last major recession," said Rob Fisher, PwC's U.S. technology industry deals leader. "The recent surge in spin off activity reflects the urgency of technology majors who are actively weighing their strategic options to compete in a future that requires agility alongside innovation. Regardless of the outcomes, the remainder of 2014 and start of 2015 are poised to prove interesting as the disruptive power of technology takes aim at some of the industry's most recognizable names."

Technology IPOs set a new record of $23.5 billion in proceeds during the third quarter with the inclusion of the largest IPO on record, while the volume of new pricings declined to nine from 22 in the second quarter. New registrations followed suit, with publicly announced IPO registrations totalling 11 for the quarter.

While third-quarter deal activity remained on a similar level as the past year, 2014 is outpacing the past two years in both deal volume and value. The software sector continues to thrive, while Internet and IT services drive deal value increases.

• The software sector remains the most active, at 20 transactions closed with an aggregate deal value of $4.5 billion.
• The number of Internet deals declined 28 percent, while value nearly doubled compared to the second quarter. As compared with the same quarter a year ago, both volume and value increased 117 percent and 161 percent, respectively.
• Hardware sector deal volume increased 15 percent, while values declined 33 percent in the third quarter. Average deal values declined to $456 million from $786 million in the second quarter.
• Consolidation continued in the semiconductor sector, with volume remaining flat while values declined 29 percent. This is largely attributed to the fact that multiple billion-dollar deals in aggregate during the third quarter were smaller than one large semiconductor deal that occurred in the second quarter.
• IT services volume declined marginally, yet values tripled, largely attributed to one record-setting deal.

"As we close out the year, we expect software to continue to be active, with the growth of the cloud underpinning this trend. Combined with increased IT spending forecasts and the number of recent spin off announcements, the technology industry is positioned for a memorable fourth quarter," added PwC's Fisher.

For more information about M&A and related services in the technology industry, please visit www.pwc.com/us/deals or www.pwc.com/technology.

PwC's US technology Deals 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 September 30, 2014 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.

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