Boosted by a record number of transactions valued at more than $1bn in the just-closed Q2, tech M&A spending across the globe surged to its highest quarterly level in a year and a half. The value of tech and telecom acquisitions announced around the globe from April to June more than doubled from the same period last year to $143bn, according to 451 Research’s M&A KnowledgeBase.
During Q2, private equity (PE) firms continued spending at an unprecedented rate, but it was the return of the so-called strategic acquirers that played a strategic role in driving the tech M&A market higher. Many of the tech industry’s biggest names shook off the timidity they have shown in recent years and started buying boldly once again.
Tech companies that have typically gone a long way in setting the tone in the overall M&A market accounted for 20 of the 30 tech deals announced last quarter, according to our M&A KnowledgeBase. And they paid up in the ‘three comma’ deals. Our calculations showed corporates paid an average of 6.8 times trailing sales, two full turns higher than the average 4.8x multiple paid by their financial rivals in their 10 billion-dollar-plus deals.
Undoubtedly, some of that corporate confidence to take on their financial rivals has come as their already stuffed treasuries received the windfall of this year’s tax law changes. Secure in their finances and, for the most part, posting solid growth, tech companies could afford to get adventurous in their acquisitions. To get a sense of this year’s acceleration in tech M&A, consider this: Spending so far in 2018 already exceeds the full-year totals from 2008-13, when tech companies were regaining their footing from the credit crisis.
More importantly, the trends that have pushed tech M&A to near-record levels should continue through the end of this year. At the midpoint of the year, 2018 is on track to see buyers shell out some $520bn for the tech companies they want to acquire. Assuming that pace holds in the second half of the year, 2018 would mark only the second time in our M&A KnowledgeBase that the value of announced transactions has topped a half-trillion dollars in a single year. 451 Research subscribers can look for our full report on Q2 M&A activity later today on our website.
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