After a depressed first half of 2010 in the United States and elsewhere, merger and acquisition activity returned to life this month. Last week Thomson Reuters reported that global M&A volume for August had already reached $197.6 billion, the busiest August since 2006 and $77 billion short of the record volume for the month, set in 1999.
Meanwhile, in the technology sector, M&A activity has been humming all year long. The value of U.S. tech deals this year is robust by almost any other comparison, notes PricewaterhouseCoopers. Among deals worth more than $15 million that closed in the first half of 2010, the aggregate value was about $30 billion, the firm points out in a recent report, citing data from Dealogic.
In the sluggish first half of 2009, that figure barely topped $5 billion. The turning point came in the fourth quarter, when deals worth more than $21 billion — almost 60% of the 2009 total — were closed.
The volume in this year’s first half was actually greater than $30 billion because there is a growing trend toward acquirers not disclosing deal values, says PwC. Most of those transactions are of the smaller variety, but there are a lot of them. According to the National Venture Capital Association, in the second quarter alone there were 78 venture-backed technology deals; the value was not revealed for virtually all of them.
In addition, a number of very large companies have made acquisitions that, while big in absolute terms, were still not deemed to have a material impact on the buyer’s balance sheet or income statement and thus went undisclosed.
Among deals with announced values, the total volume has continued to swell in the third quarter, led by SAP’s $5.8 billion purchase of Sybase. An even bigger transaction, Intel’s $7.68 billion acquisition of security firm McAfee, was announced last week and is expected to close by year-end.
By then, aggregate U.S. technology deal value for 2010 stands a good chance to equal the $77 billion figure from 2008, says Todson Page, a partner with PWC Transaction Services. “We’re certainly on a trajectory for this to be a very strong year for M&A in the historical context,” he says.
All of the activity means that in the tech sector, M&A has found a strong footing as an innovation accelerator. Looking at it one way, an M&A strategy may equate to an outsourced R&D arrangement. In other words, Page says, let start-ups try out their ideas, and when they get close to something that’s worthwhile, buy them.
The willingness of technology vendors to move boldly with M&A despite the uncertain economy could influence companies in other industries, Page speculates. “I’m certain there is a psychological impact on CEOs across sectors,” he says, “in the sense that they see these guys aren’t letting the economy slow them down in executing their long-term plans. Should you be thinking more strategically and have a longer-term vision?”