Surging strategics

Contact:  Scott Denne

Following a pair of down years, publicly traded strategic acquirers have come roaring back to the tech M&A market. Through the first four months of 2018, those buyers have collectively paid more for tech acquisitions than any start to the year since 2015. Our recent survey suggests that could continue through the rest of the year as newcomers print big deals and veteran acquirers outdo themselves.

According to 451 Research’s M&A KnowledgeBase, public companies spent $123bn on tech acquisitions through April, up from $73bn in the same period last year. Put another way, only 2015 and 2006 had produced more spending at this point in the year since 451 Research began tracking tech M&A in 2002. More than any other deal, T-Mobile’s $26bn reach for Sprint has propped up the total. Still, even backing out that purchase, which may well be undone by regulators, and Fujifilm’s increasingly doubtful agreement to buy a majority stake in Xerox for $6bn, the current year remains ahead.

In the April version of the semiannual M&A Leaders’ Survey from 451 Research and Morrison & Foerster, 58% of respondents projected an increase in strategic M&A. They also said – at a rate of six to one – that the new tax code, by lowering rates and making offshore cash available, would bolster strategic M&A. Whatever the role that tax law has played, strategics do appear to be coming back to market – and bigger than before.

T-Mobile, for example, had only acquired one other company since its reverse merger with MetroPCS in 2012. Fujifilm had only done the occasional tech deal, never approaching the $1bn mark. Looking at the buyers that round out the top five strategic transactions this year – General Dynamics, Microchip Technology and Salesforce – all had been frequent acquirers but had never before spent more than $5bn on a single deal until 2018.

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Posted in M&A