Third Quarter Technology Deal Activity Rebounds to 2012 Levels, Doubling Second Quarter 2013, says PwC US

SAN JOSE, Calif., Oct. 24, 2013 /PRNewswire/ -- Technology deals accelerated in the third quarter returning to 2012 levels after a dismally slow start to the year, with deal volume and value doubling that of the previous quarter, according to PwC's U.S. Q3 technology deals insights report released today. Private equity (PE) buyers took a more active role in technology M&A during the quarter with increased deal closures and numerous new deals announced.

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In the third quarter of 2013, PwC found that the number of technology transactions rose, increasing 97 percent over the second quarter. The third quarter ended with 63 transactions completed, compared to 32 deals in the second quarter. Average deal value increased to $440 million, up from $253 million in the first quarter and $433 million in the second quarter of 2013. Deal value during the third quarter totalled $27.7 billion, doubling that of the second quarter.  A total of eight transactions in excess of $1 billion closed.

Volumes returned to 2012 levels with the number of deals relatively flat compared to a year ago, up five percent on volume and 34 percent on value due to a number of large transactions closed this quarter. The volume of deals in excess of $250 million remained consistent with the second quarter of 2013 at 33 percent. Underlying the increase in sizable transactions was also an increase in deals less than $50 million, which rose to 24 transactions in the quarter, the largest since the third quarter of 2011.

"After a struggling start in the first of half of 2013, the third quarter demonstrated robust growth in both volume and value of closed deals, to put technology M&A on an upward trajectory toward a strong finish to 2013," said Rob Fisher, PwC's U.S. technology industry deals leader. "Additionally, there were a significant number of large deals announced during the quarter.  Private equity funds are increasingly active in the technology sector, and with growth a constant focus for technology businesses, we anticipate the abundance of cash at home and overseas held by corporate acquirers to spur deals in the months and quarters to come."

The report notes that the growth in the U.S. equities market fuelled additional technology IPOs, which remained on par with the second quarter, adding 14 new pricings with proceeds exceeding $1.3 billion.  New publicly announced IPO registrations continued, totalling 20 for the quarter and likely a number of additional registrations confidentially filed under the rules of the U.S. JOBS Act.

After a temporary drop in the second quarter, the software sector returned to lead the charge in third quarter deal activity, comprising 38 percent of total deal volume and 45 percent of total deal value.

• Software deal volume tripled that of the second quarter and climbed to levels equal to those of 2011 and the first quarter of 2012, with 24 transactions closed. Deal value increased 716 percent over the low value of deals in the second quarter, but was down 12 percent from a year ago.
• Internet transactions remained flat and total deal value dropped as the third quarter saw only one deal in excess of$1 billion closed.  
• The number of IT services deals doubled in the third quarter, and deal value increased 758 percent, driven by two deals in excess of $1 billion.
• Hardware volume increased 25 percent, while value increased 77 percent to $5.0 billion due to a series of transactions in excess of $500 million closed during the quarter.
• While semiconductor deal activity grew 160 percent with 13 transactions recorded during the third quarter, the lower average deal price resulted in transaction value eroding four percent to $4.3 billion.

The report finds that private equity funds directly acquired a total of five companies in the third quarter and backed an additional 12 companies with acquisitions through wholly-owned portfolio companies or via divestiture of an existing portfolio business.  Private equity activity is on the rise and expected to continue at higher levels through the remainder of the year.

"The significant technology deal announcements made during the third quarter provides ample reason to expect that the remainder of the year will be equally active as companies seek to close deals before year-end. The increase in announcements, coupled with a rising trend in technology divestitures in the the third quarter, is creating significant deal momentum which we expect to carry over into 2014 and drive higher technology deal volumes," added PwC's Fisher.

PwC's U.S. 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, 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.  

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.

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SOURCE PwC US