Digital transformation drives global tech M&A to record high

IT deals

Global technology mergers and acquisitions hit an all-time high value of $466.6 billion in 2016, driven by digital transformation, EY Global technology M&A report showed.

The value also represents a 2 percent increase from $459.6 billion set in 2015.

“Massive disruption from cloud, mobile, social and big data analytics technologies drove global technology M&A to all-time value highs in 2016 and will remain strong drivers in the year ahead,” said Jeff Liu, EY Global Technology Industry Leader, Transaction Advisory Services.

“But companies should prepare for new disruptions, including artificial intelligence and machine learning, which could push dealmaking even higher late in the year and in 2018,” Liu added.

In contrast to the full year’s deal value increase year-over-year, deal value in the fourth quarter declined 38 percent year-on-year to $117.2 billion.

Full-year deal volume declined 5 percent in 2016 to 3,796 deals and a 7 percent sequential 4Q16 drop to 844 deals was the second consecutive quarterly decline seen since 2012.

“The second-half slowdown in global technology M&A deal volume suggests tech companies are approaching a dealmaking plateau. But with digital disruption still in its infancy and the extraordinary growth of IoT-related deals, we don’t expect this dip in volume to translate into a long-term decline in dealmaking,” Liu said.

2016 was a year of record semiconductor consolidation driven by IoT technologies, cross-industry “blur” from non-tech buyers, unprecedented cross-border deal value and record private equity (PE) buying:

Semiconductor targets set a new aggregate deal value record of nearly $125 billion in 2016, as IoT and automobile-driven dealmaking that arose in 2015 gained momentum.

IoT deal volume increased 30 percent to 221 deals for the year and deal value tripled to $103.4 billion.  Connected car-driven deals accounted for $57 billion of total IoT deal value.

Non-tech buyers acquired 23 percent of 2016 all-deal aggregate value (up from 12 percent in 2015). This increasing deal competition coming from buyers outside of the technology sector may be one of the factors supporting high deal valuations.

Cross-border deal value set a new annual record in 2016, marked by a 147 percent increase to $67.8b in 4Q16 and a 63 percent increase for the year to $208.2 billion.

PE buyers had their fourth-highest quarterly deal value ever in 4Q16 at $20.8 billion and also set a record for annual aggregate deal value with $90.1 billion, up 61 percent over the previous year.

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