After a high-water mark, tech M&A spending ebbs

Contact: Brenon Daly

After a recent record run, tech M&A spending started slowly in 2015. Acquirers across the globe announced deals valued at just $10bn in January, only one-third the amount they dropped in January 2014 as they started a shopping spree that pushed last year’s total spending to a 14-year high. More broadly, January’s total is the lowest monthly M&A spending level since mid-2013.

While last month’s deals may not have been big, there were a lot of them. With deal volume topping 350 transactions, activity in January came in at one of the highest levels we’ve seen since the end of the recession. Buyers who rang in the new year with an announced acquisition included AT&T, Citrix, Dropbox, BMC and Demandware.

The activity, particularly by acquirers that have been largely absent from the M&A market recently, help to ease two primary concerns about the outlook for the rest of 2015. First, the recent flash of volatility hasn’t necessarily derailed deals. Wild swings and downward pressure in the US equity markets in January obviously make pricing acquisitions much more difficult. (US equity indexes fell about 3% last month alone.) But the uncertainty doesn’t appear to have eroded buyers’ confidence, which is a key component of M&A.

Additionally, coming into 2015, a number of market participants indicated that deals were getting ‘pulled through’ back in late 2014. In other words, acquirers were worried about the direction of the global economy, equity market performance and interest rates in 2015, so they pushed to get transactions done during the relatively supportive times of 2014. (It’s worth remembering that overall, deal volume last year hit its highest level in eight years. See our full M&A Outlook.) At least in early 2015, the M&A pipeline doesn’t appear to be dried up. There may not be as many big prints, but deals are still flowing to start the year.

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