The end of a bull run in tech M&A?

Contact: Brenon Daly

After sprinting at a record rate of M&A spending in 2015, tech dealmakers and investment bankers are planning to catch their breath. In the just-completed M&A Leaders’ Survey from 451 Research and Morrison & Foerster, a record low percentage of respondents forecasted an uptick in their acquisition activity over the next six months, while a record high number predicted a decrease.

Overall in the latest edition of the survey, the bulls were only slightly less bullish, while the bears were dramatically more bearish. The 44% of tech acquirers projecting an acceleration in M&A is only a handful of points below the previous low-water mark, but the 24% indicating a slowdown is more than twice the average negative forecast over the previous seven surveys.

Now in its eighth edition, the M&A Leaders’ Survey from 451 Research and Morrison & Foerster has now registered two ‘outlier’ results – one on the upside, back in spring 2014, and in the current survey, one on the downside. Back in our April 2014 survey, a record 72% of respondents forecasted an acceleration in M&A activity. That clear indication by the main tech buyers and their advisers to get busier did indeed come through in the prints. In the six quarters since that record forecast, the average quarterly spending on tech M&A stands at $120bn, almost exactly twice the average quarterly spending in the preceding six quarters, according to 451 Research’s M&A KnowledgeBase.

In our just-completed survey, we now have a similar – though inverse – significant deviation in responses. Recall that one-quarter of respondents predicted a decline in M&A activity through next spring, which is by far the highest level we’ve ever seen. The wisdom of the crowd, which comes through in our survey results, more or less accurately anticipated the start of a bull run in tech M&A a year and a half ago. In the latest survey, the crowd’s sentiment appears to have swung in the other direction. We’ll have a full report on the latest M&A Leaders’ Survey from 451 Research and Morrison & Foerster on our website later today and in tomorrow’s 451 Market Insight.

M&A spending outlook for the next six months

Survey date Increase Stay the same Decrease
October 2015 44% 32% 24%
April 2015 61% 30% 9%
October 2014 48% 36% 16%
April 2014 72% 24% 4%
October 2013 50% 43% 7%
April 2013 54% 27% 19%
October 2012 49% 34% 17%
April 2012 59% 33% 8%

Source: M&A Leaders’ Survey from 451 Research / Morrison & Foerster