A summer surge puts Q3 tech M&A back on record pace

Contact: Brenon Daly

For at least one quarter, it was as if we never turned the calendar on the record-breaking pace of tech M&A we saw in 2016. Dealmakers around the globe spent $153bn on 910 tech, media and telecom (TMT) transactions announced from July to September. That ranks the just-completed Q3 as the third-highest quarterly total since the end of the recession, according to 451 Research’s M&A KnowledgeBase. In fact, the rather unexpectedly strong M&A spending in Q3 exactly matched the average quarterly tally from 2015, when deal value hit its highest annual level since the internet bubble burst.

This summer’s surge brings the total spent by TMT acquirers around the globe so far in 2016 to $336bn, putting 2016 already ahead of the full-year totals for six of the past eight years. Looking ahead, if we assume the pace of spending from January-September continues in Q4, full-year 2016 deal value would hit some $440bn – the second-highest annual total since 2002, according to the M&A KnowledgeBase.

Spending in the summer quarter was dominated by a parade of blockbuster transactions. Overall, last quarter saw four of the five largest deals of the year announced. Significant Q3 transactions include:

  • Continuing its big-ticket expansion into technology growth markets, SoftBank paid $32.4bn for ARM Holdings. The deal stands as the second-largest semiconductor transaction in history, trailing only Avago’s $37bn purchase of Broadcom last year.
  • Intel ended its experiment of baking security directly into its silicon by divesting a majority stake of its McAfee division. The move values McAfee at just $4.2bn, meaning the business has lost about 40% of its value under Intel’s six-year ownership. For comparison, during that same period, Symantec’s market value has almost doubled.
  • Hewlett Packard Enterprise unwound a series of earlier software acquisitions that were supposed to drive its next leg of growth, taking a pretty big discount in the process. The portfolio, which was accumulated over a decade by its predecessor company, cost HPE more than $20bn to acquire, but was spun off to Micro Focus in a transaction valued at $8.8bn.
  • Oracle paid $9.3bn, or 11x trailing sales, for NetSuite, making the largest purchase of a subscription software vendor ever. NetSuite’s valuation was roughly twice the level that Oracle has paid for the license-based software providers it has bought over the years.
  • In the biggest sale of a VC-backed company in two and a half years, Walmart paid $3.3bn for e-commerce startup Jet.com.

Our full report on the blockbuster Q3 tech M&A activity will be available to 451 Research subscribers later today.

Recent quarterly deal flow

Period Deal volume Deal value
Q3 2016 910 $153bn
Q2 2016 1,043 $110bn
Q1 2016 1,039 $73bn
Q4 2015 1,063 $185bn
Q3 2015 1,162 $85bn
Q2 2015 1,074 $208bn
Q1 2015 1,040 $121bn
Q4 2014 1,028 $65bn
Q3 2014 1,049 $102bn
Q2 2014 1,005 $141bn
Q1 2014 854 $82bn

Source: 451 Research’s M&A KnowledgeBase