Technology initial public offerings (IPOs) are like sunny summer days in San Francisco: more infrequent than you think. In sharp contrast, the technology mergers and acquisitions (M&A) market continues to be on an upswing, giving investors much-needed relief. Sure, there’ve been some signs of life in the IPO market — 39 listings during the second quarter of 2010 — but ask anyone on Sandhill Road (the epicenter of tech money), and they’re all busy calling on their banker pals.
According to a report prepared by PriceWaterhouseCoopers (PWC), during the second quarter of 2010, there were 36 technology transactions worth $11.37 billion, vs. the first quarter of 2010, when 34 deals totaled $18.96 billion. Year-on-year volume during the second quarter of 2010 was up 50 percent, and values up nearly 400 percent. According to PWC data, if you excluded the $2.8 billion HP paid for 3Com, and $1.1 billion paid by Bain Capital, Berkshire Partners and Advent for SkillSoft, the average deal during the second quarter was around $200 million. The numbers for the third quarter are only going to be higher.
As we pointed out earlier, large tech companies have managed to come out of recession relatively cash rich and innovation poor. This is precisely the reason why they’ve revved up their M&A engines. Even during the summer, typically a slow season, companies have been out shopping. There is Google buying Slide and Jambool, Hewlett Packard buying Fortify and IBM snapping up Unica Corp. From Zynga to Apple, there is no stopping the buyers it seems. PWC forecasts:
M&A as an innovation accelerator has firmly taken hold, as evidenced by the large number of venture- backed deals in the first half of this year. This will continue to drive mid-market transactions, which have historically dominated technology deal volumes. Software transactions at both ends of the size scale will continue as incumbents round out their offerings or acquire industry- specific applications, and as major hardware players expand into end-to-end solutions. Finally, consumer technology and Internet majors will continue to work their way along the value chain to capture market and mindshare as mobile computing, entertainment and communications markets converge on intelligent and user- friendly devices.
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