A summer break for M&A

Even though spending in August pushed the value of tech deals so far in 2018 ahead of full-year 2017, the M&A market seemed to be mostly kicking back on summer holidays. During the dog days of August, tech acquirers around the globe announced transactions valued at just $23bn, according to 451 Research’s M&A KnowledgeBase. That’s the lowest monthly spending of the year so far, and just slightly more than half the average amount buyers have handed out each month since January.

Meanwhile, the number of deals slumped to its second-lowest monthly total in August. Volume at the top end of market was even thinner. The M&A KnowledgeBase lists just five transactions in August valued at more than $1bn. That’s down from an average of nine $1bn+ deals each month from January-July.

Further, this month’s blockbuster acquisitions didn’t garner blockbuster valuations: four of the five big prints in August went off at less than 4x trailing sales, by our calculations. The one exception (Cisco’s $2.4bn purchase of Duo Security) was a transaction that slotted cleanly into this year’s trend of tech bellwethers once again announcing significant deals. Other than Cisco’s splash, however, the tech industry’s main players were notably absent. Neither Microsoft nor IBM nor Oracle put up a print in August.

Obviously, we don’t want to read too much into a one-month blip in M&A activity. But the August slowdown is noteworthy because of the robust strength of the overall US economy and the record equity prices. (On average, earnings at S&P 500 companies were up 25% in Q2, with almost 10% revenue growth.) That sort of bullishness tends to embolden buyers, as we have seen throughout 2018, which is still tracking to the second-highest annual total for M&A spending since 2000. Maybe the market just needed a vacation in August.