A happy New Year

Contact: Brenon Daly

Much is made about how the opening days of trading tend to set the tone for the equity markets each year. (If that’s the case, Monday’s strong performance of both the Dow Jones Industrial Average and the Nasdaq Composite Index would indicate a pretty bullish 2010.) And since there is a correlation between the equity markets and the M&A market, we thought we’d note that deal flow in the New Year is also starting strong. The first full business day of 2010 saw big-name acquirers such as EMC and Thomson Reuters both reach for startups.

Actually, the opening flurry of deals in 2010 continues a pickup in M&A that really took hold in the final quarter of 2009. With the US economy growing again in the fall – after a year and a half of contraction – companies started shopping again. (The 12% surge in the Nasdaq in the fourth quarter also undoubtedly helped confidence.) With a few late-2009 deals still to tally, we project spending on fourth-quarter tech M&A will come in at about $55bn. That’s the highest level since the second quarter of 2008 and represents a 45% increase over spending in the fourth quarter of 2008. As for the outlook for the balance of 2010, two-thirds of tech bankers we recently surveyed told us their pipelines are fuller now than they were a year ago.

Quarter-by-quarter M&A totals, 2008-09

Period Deal volume Deal value
Q1 2008 839 $57bn
Q2 2008 719 $173bn
Q3 2008 733 $32bn
Q4 2008 724 $38bn
Q1 2009 659 $10bn
Q2 2009 770 $48bn
Q3 2009 757 $38bn
Q4 2009 784 $55bn

Source: The 451 M&A KnowledgeBase