A muted May for tech M&A

Contact: Brenon Daly

The summer slowdown has arrived early in the tech M&A market. Overall, tech acquirers announced relatively few transactions in the just-completed month of May, and many of the deals that did get done went off at a discount. According to 451 Research’s M&A KnowledgeBase, the value of announced tech deals around the globe in May hit just $25bn, as a raft of low-multiple transactions kept a lid on total spending. Additionally, the number of tech transactions in May remained below levels of recent years.

At the top end of the market, deal flow was decidedly mixed in May. On the one hand, acquirers announced five transactions valued at $1bn or more in May, nearly matching the highest monthly total so far this year recorded in 451 Research’s M&A KnowledgeBase. Big prints included Apollo Global Management’s $2bn take-private of West Corporation and RCN Telecom’s consolidation of Wave Broadband for $2.4bn. However, a number of those nine- and ten-digit deals came at below-market multiples. Of the 20 largest tech deals announced in May, fully nine of them were valued at just three times trailing sales or less, according to 451 Research’s M&A KnowledgeBase

The $25bn spent in May essentially matched the average monthly level of spending for 2017. However, it is only about half the amount, on average, that tech acquirers doled out each month over the record stretch during 2015-16. With five months of 2017 already in the books, this year is tracking to just $300bn worth of tech transactions this year. That would represent the lowest annual total in four years, and a dramatic slowdown from the roughly $500bn spent in 2016 and $600bn in 2015.