Technology M&A decline 38% in first quarter of 2013: PwC

by CBR Staff Writer| 01 May 2013

Driven by the global macroeconomic uncertainties

The technology transaction volume has dropped by 38% during the first quarter of 2013 to 40 deals closed, compared to 65 deals closed during the corresponding quarter of 2012, according to a new report from PwC.

The report revealed that the deal value fared worse due to few deals in excess of $1bn closing by March 2013, with the deal value dropping 60% to $8.3bn over the earlier quarter.

During the quarter, the deal volumes and values dropped 38% and 72% respectively compared to the deal activity in the first quarter of 2012.

PwC US technology industry deals leader Rob Fisher said driven by the global macroeconomic uncertainties, the first quarter of 2013 saw technology deal volume and values drop unexpectedly to a four-year low as businesses prioritised operations above M&A.

"Nevertheless, strong fundamentals, record cash levels and high equity valuations as well as promising recent announcement make Q1 M&A seem more like a 'pause' than a trend," Fisher said.

Software M&A reported the highest number of deals during the quarter mainly driven by firms across industries investing in software-driven functionality and automation in products and services.

About seven technology IPOs had been placed in the first quarter of 2013 with total proceeds of just under $1bn, which is below the volume and value of IPOs registered during the fourth quarter of 2012.

During the first quarter, software deals were responsible for 53% of deal volume and 69% of deal value respectively with a range of deals including firms providing solutions to the education, manufacturing, banking, retail, entertainment and other industries.

Internet transactions included 13% of overall deal volume and 18% of total deal value for the period, reporting a 58% drop in volume from the earlier quarter and a 36% decline in value.

IT services and semiconductor businesses reported declines with semiconductor deal volumes dropping 25% and IT services declining 50% compared to prior quarter.

In addition, the hardware sector was hit with hardware deal volume dropping by 79% for the previous quarter and 67% percent from the first quarter of 2012.

"More recent deal announcements by large technology companies suggest that historically acquisitive players are returning to the deal table," Fisher added.

"These factors combined with the record levels of cash on hand and high equity values by the technology majors indicate a growing confidence that deal activity may rebound in the quarters to come."

Private equity (PE) deals dropped during the quarter, while one large PE transaction was responsible for half of the quarter's deal value, while about eight of the 40 deals closed during the quarter were acquired by financial investors or supported by financial sponsors.

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