M&A spending slump to start 2012

Contact: Brenon Daly

With Q1 set to wrap on Friday, M&A spending is on track for its lowest quarterly level in two years. The aggregate value of all tech transactions announced around the globe in the first three months of 2012 slipped to just $31bn, lower than both the previous quarter (Q4 2011) and the same quarter last year (Q1 2011).

The declining M&A activity comes as the overall economic environment has improved dramatically from 2011. For instance, there haven’t been emergency bailouts or historic downgrades of sovereign debt so far this year. Even Europe, which was the epicenter for much of the recent economic woes, is back growing again after actually contracting in the fourth quarter.

Reflecting that renewed optimism, the Nasdaq index has poked above 3,000 for first time since late 2000. During the quarter, the index recorded an almost uninterrupted ascent, gaining an astounding 19% since the start of the year. On top of the ever-increasing share price, most tech companies are continuing to stuff cash into their treasuries at a record rate.

So there are plenty of resources – in the form of both market confidence and acquisition currency – to do transactions. And yet few companies are shopping, at least not for significant purchases. In Q1, we recorded just eight transactions valued at $1bn or more – compared with an average of 12 big-ticket deals announced in each quarter last year.

Recent quarterly deal flow

Period Deal volume Deal value
Q1 2012 882 $31bn
Q4 2011 874 $38bn
Q3 2011 955 $63bn
Q2 2011 952 $71bn
Q1 2011 914 $47bn

Source: The 451 M&A KnowledgeBase

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