Technology M&A volume skyrockets
The sector saw the highest number of deals across all industries in 2017, as the hunt for innovative technologies continues to break down sector boundaries
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Emerging technologies—including those related to autonomous vehicles, blockchain and machine learning—continue to drive acquisitions, as companies seek scale and market presence. The TMT sector underwent a 33.7 percent drop in value year-on-year to US$240 billion, but volume increased 4 percent to 1,213 transactions—the highest across all sectors in 2017.
However, big-ticket deals are still very much on the table, as evidenced by semiconductor group Broadcom's unsolicited US$130 billion bid for wireless technology business Qualcomm. The proposed deal would result in the largest tech deal in history.
Number of TMT deals in the US in 2017—the highest across all sectors in 2017
Diversification and consolidation
"The largest technology companies want to capitalize on ever-growing markets for cloud-hosting and cloud-computing, as well as digital content distribution, machine learning and AI," says Bill Choe, partner at White & Case. Cisco Systems, for example, has announced its plans to acquire machine learning operations analytics firm Perspica and fold it into AppDynamics, an application performance analytics business it previously acquired for US$3.7 billion in January. The AppDynamics deal was part of Cisco's wider strategy to diversify and broaden its networking hardware expertise into data analytics.
Meanwhile, the need to consolidate within the semiconductor space continues to drive deals in the top end of the market. In the largest US tech transaction of the year, Marvell Technology Group acquired rival chipmaker Cavium for US$6.3 billion. The deal signals the ongoing trend of consolidation within the industry, as larger firms, such as the previously mentioned Broadcom, threaten to monopolize the market.
US $240 billion
Value of deals in US technology M&A in 2017— a 33.7 percent drop compared to 2016
Everyone's a tech company now
Tech deal activity continues to be spurred by transactions that enable tech companies to use M&A to expand into adjacent sectors, as was the case with Amazon's purchase of upmarket grocery chain Whole Foods for US$13.5 billion.
Another example is online media firm Internet Brands' US$3.4 billion purchase of WebMD, a provider of health information services through various online portals and mobile platforms. "The ubiquity of connected smart devices and advancements in computing power and storage capacity have transformed industries across the board and broken down historical barriers," says Arlene Hahn, partner at White & Case. "As a result, companies that were historically considered bricks-and-mortar are now potential tech targets."
TOP TECHNOLOGY DEALS 2017
1. A consortium led by SoftBank agreed to acquire a 17.5 percent stake in Uber Technologies, Inc. for US$9 billion
2. Marvell Technology Group agreed to acquire Cavium, Inc. for US$6.3 billion
3. Cisco Systems bought AppDynamics for US$3.7 billion
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