A dramatically slower 2011 fourth quarter for technology mergers and acquisitions shouldn't discourage corporate finance chiefs, because buyer activity this year actually could be boosted by the dampened expectations.
As expected, the year-end E&Y tally showed that global tech mergers rose sharply -- 41%, in fact, to $167.7 billion for those deals with values disclosed. That was true even as the value of M&A across all industries fell slightly for the year. The picture for tech in Q4 was much quieter, though, with only a 7% year-to-year increase.
'CFOs Shouldn't Worry'
"After a good run-up in technology deal volumes and total values since early 2009, and especially the two deals over $10 billion announced in the third quarter of 2011, CFOs should not be too worried about the slowdown in Q4," Joe Steger, global technology industry leader for E&Y's Transaction Advisory Services practice, says in comments prepared for CFOworld.com. "CFOs should focus on whether acquisitions help their company accelerate the achievement of their strategic objectives."
In noting the possibility of a "dampening of valuation expectations on the part of sellers," Steger says that it "could be good for buyers." At this point, he suggests: "Potential sellers should focus on building their businesses until the right opportunity presents itself."
Tech advancements are bound to continue to encourage global activity, including in the short term, as both economic activity and corporate wherewithal improve, he says. "The disruptive technologies of cloud computing, smart mobility, social networking, big data analytics and convergence will continue to drive long term technology M&A. In the short-term, improved confidence in macroeconomic conditions and a company's individual ability to execute its growth strategy will drive technology M&A growth. The high correlation between the NASDAQ Composite index and technology M&A deal volume suggests the performance of the NASDAQ is a good barometer of deal activity."
There were 3,006 tech deals announced last year, including both those with values disclosed and undisclosed, a 13% increase from the 2,658 in 2010. The fourth-quarter deal number, however, declined for the third consecutive period, to 676 deals, a 4% year-over-year decline, and an 11% sequential quarter-to-quarter decline. The quarter's decline was 15% since dealmaking peaked in Q1, at 794 deals.
The fourth quarter was the lowest quarterly period since the second quarter of 2010, reflecting, as E&Y put it, "that global technology dealmaking is not immune to the effects of the macroeconomic uncertainty that chilled M&A in other industries."
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