Strategic shopping

by Brenon Daly

The tech M&A market just hit a watershed moment, with dealmakers handing out more money already this year than they did in all of 2017. 451 Research’s M&A KnowledgeBase shows spending on tech and telecom transactions around the globe since January has totaled $334bn, slightly eclipsing the full-year total of 2017. For the most part, this year’s surge has been led by corporate acquirers returning to the market after cooling it on the sidelines last year.

Of the one-third of a trillion dollars in M&A value we have tracked so far this year, so-called strategic buyers account for three-quarters of the total amount, or $247bn. That’s $100bn more than corporate acquirers had spent at this point last year, according to the M&A KnowledgeBase. More broadly, overall spending by strategic buyers is running at the second-highest level for any comparable period since the credit crisis a decade ago.

More importantly than the dollars, however, is who is spending them. In 2018, the acquirers that, historically, have set much of the tone in the overall market are doing that once again. Tech bellwethers such as Microsoft, SAP, Salesforce and Adobe have all announced acquisitions valued at more than $1bn in 2018. Last year, not a single one of the quartet did that.

Of course, those companies – and, indeed, most US companies across the entire economy – are much richer now than they were last year, by a variety of measures. The tax overhaul that was enacted at the start of 2018 has pushed cash balances for most businesses to record levels. Meanwhile, the bull market continues to run along, driving valuations ever higher. (For reference, the stocks of the four tech giants that have announced a $1bn+ deal so far in 2018 are up an average of 46% over just the past 12 months.) With high-flying valuations and more cash than they have ever held, it’s no wonder tech vendors are back buying big.

Posted in M&A