From the Wires
Global technology M&A value declines 35% in 2012 but only 4% in fourth quarter
- Fewer large, transformative deals compared with 2011
By: PR Newswire
Feb. 13, 2013 09:01 AM
NEW YORK, Feb. 13, 2013 /PRNewswire/ -- The aggregate value of technology mergers and acquisitions (M&A) declined 35% worldwide in 2012, to US$114.1b from US$175.7b in 2011, according to Ernst & Young's Global technology M&A update: October-December 2012 and year in review report [hyperlink to the report]. Deal value in 4Q2012 was US$29.4b, down 4% year over year (YOY) from US$30.5b in 4Q 2011.
Nearly the entire full-year decline came from deals above US$1b in value. For example, the largest deal of 2012 would have placed fifth in 2011 and only two 2012 deals would have made it onto the 2011 top 10 list. Companies were hesitant to engage in large, transformative, technology deals because the uncertain macroeconomic environment increased many risks, particularly the risk of an incorrect valuation as equities markets fluctuate and buyers believe many company values remain high.
Deal volume held steady, however, as companies continued to engage in smaller, more strategic deals driven by technology megatrends that are generating transformative innovation in technology and leading to technology-enabled innovation in other industries. These megatrends include smart mobility, cloud computing, social networking, big data analytics and accelerated adaptation, as technology companies rapidly adapt to the needs of specific industries and other industries rapidly adapt to the evolving possibilities that technology enables.
Both corporate and private equity (PE) deal-making declined. The aggregate disclosed value of PE deals declined by nearly half (down 47%), to US$18.5b in 2012 from US$34.8b in 2011. Aggregate value of corporate deals declined 32% to US$95.6b in 2012 from US$140.9b in 2011. The average value of deals that had disclosed values was US$188m, down 14% from US$218m in 2011.
Joe Steger, Global Technology Industry, Transaction Advisory Services Leader, at Ernst & Young, says:
"The macroeconomic pressures that returned in late 2011 held down global technology M&A activity in 2012. But, that pressure also helped clarify what's important. We saw growth in the strength of transformative megatrends — social-mobile-cloud, big data analytics and accelerated adaptation — while the really big-ticket deals pulled back. Heading into early 2013, the short-term outlook suggests a soft couple of quarters but the long-term outlook for technology M&A remains strong, as both technology and non-technology industries have an ongoing need to adapt to disruptive technology innovation."
Cross-border deals decline for first time in three years
Cross-border deal volume declined for the first time in three years, to 970 deals in 2012 from 999 deals in 2011 (-3%). The full-year 2012 value of cross-border deals fell 32% to US$47b from US$68.9b in 2011. Because that decline was less than the overall 35% drop, cross-border aggregate value rose to 41% of overall aggregate value from 39% in 2011. But cross-border deal-making followed the same pattern we saw in 2011 – it climbed in the first half of the year and fell in the second half. In 4Q4 2012, cross-border value fell to US$8b, or 27% of quarterly aggregate value.
The Americas continued as the major trendsetter in social-mobile-cloud and big data analytics deals in 2012, acquiring 92% of full year global volume and disclosed value. In Asia-Pacific and Japan, online and mobile video and video games were the significant value drivers for technology M&A during 2012. In Europe, the Middle East and Africa (EMEA), cloud/SaaS, smart mobility and social networking megatrends propelled much of the M&A buying in 2012.
Looking ahead: mixed signals for technology M&A with possible recovery in late 2013
In 4Q12, technology M&A data gave mixed signals, suggesting that the market might be approaching a near-term bottom. However, the report noted 22% YOY growth in mid-priced deals (between US$100m and US$1b) in 4Q12, which suggests that the broad-based need for transactions that help companies accelerate their adaptation to transformative technology innovation has not changed. What has changed is that macroeconomic uncertainty increased throughout 2012 at the same time that many valuations increased. This was demonstrated by the 16% increase in the NASDAQ, driving up the valuation risk inherent in large transformative deals.
Notes to editors
About our M&A update report
Ernst & Young's Global Technology Center
About Ernst & Young
Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.
This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.
SOURCE Ernst & Young
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