Tech M&A in Q2: A clear record, but cloudy outlook

Contact: Brenon Daly

At the beginning of June, we noted that spending on tech deals in the second quarter was tracking to hit its highest quarterly level since the Credit Crisis erupted two years ago. And with the second quarter set to end later today, the period will indeed set a record, thanks largely to the return of big buyers. On a preliminary basis, we tallied $62bn worth of transactions in the April-June period. That’s basically 10% higher than the previous record, and fully twice the spending that we saw in the first three months of the year.

The new spending record – at least it’s a record in the world of the ‘new normal’ – comes despite some ominous growls from a bear market. The Nasdaq shed 10% of its value in the second quarter, finishing both May and June solidly in the red. For the past six weeks, the index has basically been lower than where it started the year.

Despite a long-standing correlation between the equity markets and M&A, spending on deals has picked up as the Nasdaq has dipped. However, where the correlation has stayed true is in the number of transactions. Activity has slowed virtually each month of the year, hitting its lowest level for 2010 in June. In fact, the monthly totals for each of the three months of the second quarter were lower than the lowest monthly total in the first quarter.

2010 activity, monthly

Month Nasdaq return Deal volume Deal value
January (5%) 296 $5bn
February 4% 278 $8.3bn
March 8% 273 $17bn
April 2% 252 $21.1bn
May (8%) 269 $19.7bn
June (5%) 249 $21.2bn

Source: The 451 M&A KnowledgeBase