Cross-sector deals drive technology M&A | White & Case LLP International Law Firm, Global Law Practice
Cross-sector deals drive technology M&A

Cross-sector deals drive technology M&A

Tech firms transcend sector boundaries in their race to innovate, while Trump's immigration policy casts a cloud of uncertainty over the industry

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The first half of 2017 brought 441 deals worth US$41.3 billion targeting US technology firms. Compared with H1 2016 activity, value in tech-sector M&A is down 40.2 percent from US$69.1 billion, and volume is down from 463.

The drop in headline figures, however, does not reflect how technology has become one of the most important drivers of M&A across all sectors. Of the ten largest technology deals in H1 2017, only four are traditional tech M&A transactions between two industry incumbents. The other six transactions involve at least one party from a non-tech industry.

 

Breaking boundaries

Non-tech companies will need to invest in tech not to disrupt an industry, but just to remain competitive.

Arlene Hahn, Partner, White & Case

Online retailer Amazon, for example, has shaken up the consumer sector with its purchase of brick-and-mortar grocer Whole Foods for US$13.5 billion, breaking down preconceptions of where the distinctions between physical retail and technology lie. Driverless car technology, meanwhile, has opened the door for pure technology companies to compete against established automotive manufacturers, as demonstrated by Intel Corporation’s US$15 billion acquisition of Israeli driver assistance system developer Mobileye.

"The conversation has expanded beyond just pure tech," says White & Case partner Arlene Hahn. "As more devices become smart, products become connected, and more processes become automated, non-tech companies will need to invest in tech not to disrupt an industry, but just to remain competitive."

 

The H1-B lottery

Many technology companies are worried this flow of human capital may soon be cut off.

Poonam Gupta, Partner, White & Case

But although cross-sector convergence means the tech industry is positioned to continue generating strong dealflow, there are major concerns about the consequences for the industry if the Trump administration clamps down on immigration into the US.

The H1-B visa program, which allows companies to bring into the US a fixed number of workers in specialty occupations each year, has been an important source of talent for technology companies. Many are worried this flow of human capital may soon be cut off.

Poonam Gupta, White & Case Director of Immigration Services, says technology companies are looking at other ways of using talent in and out of the US in case the H1-B rules change: "Technology companies that use the H1-B category are concerned about changing H1-B rules. Many are taking steps such as hiring more US citizens, hiring people overseas who can be transferred to the US for short or long periods of time, and increasing their use of collaboration tools such as videoconferencing technology to ensure continuity of project management."

 

Top TMT deals H1 2017

1. Sinclair Broadcast Group, Inc. agreed to buy Tribune Media Company for US$6.6 billion

2. Apollo Global Management, LLC agreed to buy West Corporation for US$4 billion

3. Cisco Systems Inc. bought AppDynamics, Inc. for US$3.7 billion

    
    

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Forging ahead: US M&A H1 2017

 

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