With two months in the books, 2016 tech M&A is still slogging along

Contact: Brenon Daly

For the second straight month, tech M&A in February looked more like the post-recession years leading up to 2015’s record activity than last year’s bonanza. Spending on tech, media and telecom (TMT) acquisitions around the globe in the just completed month hit $28.7bn, according to 451 Research’s M&A KnowledgeBase. While that represents a significant bump from the paltry $20.5bn of aggregate spending in January, February’s total falls more than one-third lower than the average monthly level in 2015. Further, the number of transactions in this leap-year February slipped to the lowest monthly number since late 2014.

Looking inside the pricing of last month’s deal flow, transactions tended to be polarized. On the top end, big buyers Cisco and Microsoft both paid double-digit valuations in their purchases of Jasper Technologies and Xamarin, respectively. Also, in terms of deal size, IBM’s $2.6bn reach for Truven Health Analytics is notable as Big Blue’s largest acquisition since late 2007.

However, as might be expected as the equity markets ground lower across the globe in February, many more tech acquisitions went off at significantly reduced valuations. For instance, onetime IPO hopeful Yodle fetched just $342m, or 1.6x trailing sales, in its sale to Web.com. LoJack got erased from the Nasdaq at just 1x trailing sales. And LeapFrog Enterprises, an educational toy maker whose shares once traded at north of $40 each, is set to be consolidated for just $72m, or $1 per share.

In addition to pressuring valuations, the turmoil in the equity markets has also scared off any companies from going public. Two months into 2016, we still haven’t seen a tech IPO. Even Nutanix – which filed its initial S-1 in late December – hasn’t updated its paperwork in the 10 weeks since then. The drought so far this year comes as corporate development executives in a 451 Research survey gave their lowest forecast for the number of tech IPOs since the credit crisis.

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