Contact: Brenon Daly
As 2016 winds down, the deals so far this month are looking a little tired as well. At the top end of the market, December’s prints have been dominated by classic late-cycle M&A, with well-established buyers such as telcos and private equity (PE) firms consolidating a number of mature sectors. Since the start of the month, tech and telecom acquirers have spent $35.1bn on 204 transactions around the world, according to 451 Research’s M&A KnowledgeBase.
Nearly half of this month’s total spending has come in a single deal: 21st Century Fox’s reach for British entertainment communications provider Sky. (It paid $14.8bn for the 61% stake of Sky that it didn’t already own.) In many ways, that old-line consolidation set the tone for dealmaking this month, which was characterized by conservative strategies and valuations. Other similar large transactions in December have included Equinix’s $3.6bn pickup of 29 datacenters from Verizon, Golden Gate Capital’s $1.8bn take-private of Neustar and Blackstone Group’s sale of Optiv Security to fellow PE shop KKR.
The valuation of these acquisitions underscores the fact that December dealmaking has featured more ‘value’ than ‘growth’ strategies. All five of this month’s biggest deals have gone off at less than 4.4 times trailing sales, which is the average multiple for the 50 largest transactions announced overall in 2016, according to the M&A KnowledgeBase. On average, buyers in December have paid 3.3x trailing sales, a full turn lower than they did in the previous months of the year.
2016 tech M&A activity, monthly
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Source: 451 Research’s M&A KnowledgeBase