Cloud, big data speed past other tech sectors in M&A deals
Acquisitions of cloud and big data firms increased significantly despite an overall decline in mergers and acquisitions (M&As) in the technology sector last year, according to the latest figures from accounting firm Ernst & Young.
Cloud firm acquisitions grew to more than 15 percent of global technology M&A deal volume in 2012, more than triple its level in 2011. Big data firm acquisitions also posted healthy growth, but from a smaller base, according to the firm's Global Technology M&A Update.
In 2012, the top five tech deals in terms of value were Cisco's (Nasdaq: CSCO) acquisition of NDS for $5 billion, SAP's (NYSE: SAP) purchase of Ariba for $4.5 billion, CGI Group's acquisition of Logica for $2.7 billion, Dell's (Nasdaq: DELL) purchase of Quest Software for $2.6 billion and ASML Holding's acquisition of Cymer for $2.5 billion.
"SaaS [software-as-a-service] and cloud ran away from the rest of the pack in terms of deal-driving trends in 2012," Joe Steger, head of global M&A and transaction advisory services leader for Ernst & Young, told FierceEnterpriseCommunications. There were between 450 and 500 SaaS and cloud deals and between 150 and 200 big data analytics deals, he related.
In addition, non-tech firms increased their technology-buying activity, accounting for 10 percent of the aggregate M&A value and 12 percent of the M&A volume. Other sectors that saw increased deal-making included smart mobility, social networking, advertising and marketing, security, mobile payment and healthcare IT, according to Ernst & Young.
Tech M&A deal value declined 35 percent last year to $114 billion from $176 billion in 2011. The 2011 value total was boosted by two deals that exceeded $10 billion: Google's (Nasdaq: GOOG) $12.5 billion acquisition of Motorola Mobility and HP's (NYSE: HPQ) $11.7 billion purchase of Autonomy.
Around 28 M&A deals totaled more than $1 billion last year, representing 45 percent of the full-year aggregate value. This compares with 36 M&A deals in 2011, or 63 percent of the full-year aggregate value.
Deal volume declined slightly in 2012, with 2,934 deals consummated last year, just two deals fewer than in 2011. Corporate volume increased 2 percent, while private equity volume declined 19 percent.
The decrease in deal volume manifested itself in two sectors: Internet and semiconductors. The 12 percent decline in Internet deal volume in the second half of the year was the largest drop ever, according to Ernst & Young.
"Macroeconomic uncertainty took hold in 2012, which had a dampening effect on large transformative deals, but it did not slow down the smaller and mid-sized strategic deals of $1 billion or less," Steger observed.
Steger identified five "megatrends" in technology M&As over the last couple of years: smart mobility, cloud computing, social networking, big data analytics and accelerated adaption (non-technology companies acquiring technology firms).
"Smart mobility is embedded in a lot of different areas, whether it is embedded in SaaS and cloud or social networking, mobile games and big data," Steger said.
For 2013, Steger predicts that the first quarter will be slow in terms of tech M&A activity. For the entire year, he expects a decline in megadeals because of continued macroeconomic uncertainty.
- read Ernst & Young's report