The quarterly Ernst & Young global technology M&A update, published Wednesday, takes a broad overview of the technology industry’s mergers and acquisitions over the past three months and across the whole of last year.
The condensed version:
- More deals are being made. The fourth quarter of 2010 saw 27 percent more deals being struck than in the same period of 2009, although activity was only marginally higher than third quarter 2010 (702 deals worldwide compared to 700 deals). Across the year, there’s significant growth.
- Those deals aren’t necessarily of greater value. Across the whole of 2010, the average deal value dropped by 10 percent to $131 million, down from $145 million in 2009. However, the value of private equity deals increased; it was straight-up corporate acquisitions that showed the big drop.
- IPO activity is increasing rapidly, rising from just 55 flotations in 2009 to 180 in 2010. Fourth quarter 2010 saw 53 stock market debuts alone — almost as much as the whole of the previous year.
- Europe is spending heavily. In previous years, European nations have often been regarded sellers, building companies that are then acquired by rivals elsewhere — a production line of startups and services bought by American firms (think Skype and MySQL for starters). In 2010, however, the two regions switched places: Europe became a net importer, and the U.S. became a net exporter. The European country leading the charge was the U.K., which overtook Japan in terms of deal activity with 66-percent growth.
E&Y’s Joe Steger characterizes this as strategic:
“Although big-ticket transactions slowed down during the first quarter, the technology sector has continued to see a steady increase in deal activity — particularly small, strategic deals,” he says.
Underneath it all, it’s hard to know exactly what this means; after all value is not the same as worth. The numbers are driven by some big acquisitions, such as SAP’s $5.8 billion acquisition of Sybase, but it’s a mixed picture overall.
What I suspect it indicates, at least for now, is that European technology companies are no longer as keen to flip early to American buyers; U.S. companies are still highly acquisitive (Google alone made 28 deals); but essentially larger companies are happier to consolidate right now. They’re able to take advantage of the weaker market to strike, whether it’s for opportunistic purposes or because they are making those longer-term strategic bets that Steger mentioned.
It will be interesting to see whether this pattern plays out over 2011 as well. What does the picture look like to you?
Related content from GigaOM Pro (subscription req’d):