For tech M&A, 2016 is more so-so than go-go

Contact: Brenon Daly

At the start of 2016, this year looks a lot more so-so than go-go for tech M&A. Spending on global tech, media and telecom acquisitions in the just-completed month of January exactly matched the middling monthly average registered from 2010-14, just before spending soared in 2015 to its highest level in a decade and a half. Compared with last year’s record, the value of January deals reached just half the average monthly spending in 2015. (See our full report on last year’s astounding M&A activity.)

Across the globe, acquirers spent just $20.7bn on 365 transactions in January, according to 451 Research’s M&A KnowledgeBase. (It’s worth noting that while the value of January acquisitions dropped by half vs. the average month in 2015, deal volume in January exactly matched last year’s monthly average.) One reason for the weak start for M&A in 2016 is the drubbing the equity markets have taken so far this year. The Nasdaq plummeted 8% in January, the worst monthly performance for the index in a half-decade.

Amid the index’s decline last month, a number of tech vendors got roughed up as they reported lackluster fourth-quarter results and projected a slowing 2016. (Think about Intel’s datacenter business in Q4 growing at just half the rate it grew in Q1-Q3, or Apple reporting flat iPhone sales for the first time in that product’s history.) The uncertainty basically knocked out any of the more speculative, high-multiple transactions from the top end of the M&A market. For instance, the average valuation of the four largest deals in January was less than 2x trailing sales.

To help make sense of what’s happening now in the tech M&A market, as well as the outlook for the rest of 2016, be sure to attend our webinar on Wednesday, February 3 at 10am PST. The hour-long Tech M&A Outlook webinar features forecasts for both acquisition activity and valuations, in addition to providing specific outlooks for a handful of key tech sectors – including Internet of Things, mobility and information security – that we expect to be particularly active in the coming year. You can register here.

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