by Brenon Daly
After spending on tech acquisitions in 2019 slumped about 20% from the previous year, 2020 is starting even weaker. Dealmakers around the world handed out just $28bn on tech and telecom transactions in January, according to 451 Research‘s M&A KnowledgeBase. Spending in the just-closed month represents the softest open for tech M&A in three years.
Furthermore, January 2020 has seen acquirers move lower in almost a step-function fashion compared with recent years. (Granted, a single month is an almost absurdly short time period in which to draw any conclusions.) Nonetheless, our data shows 2020 is starting at roughly $10bn lower than the average monthly spending in 2019, which was roughly $10bn lower than the average monthly spending in 2018.
In our 2020 Tech M&A Outlook: Introduction, we offer some reasons for the likely ‘lower highs and lower lows’ for the overall market in the coming year. One of our key rationales: The tech M&A industry is on the cusp of a generational transition. The old-guard acquirers that had shaped the market for decades are simply not doing deals at the same pace they once did.
For instance, in our M&A Outlook report, we note that activity in 2019 from typical M&A market-makers such as IBM, SAP, Microsoft and Oracle dropped to its lowest aggregate level in a decade and a half. Our data shows that last year the quartet, collectively, announced just one-third as many acquisitions as they did at their peak. Again, with the disclaimer that one month doesn’t make a year, we would note that not one of those four major acquirers have put up a print so far in 2020.
Instead of the ‘usual suspects’ at the top end of our M&A KnowledgeBase, new buyers – those that have only recently begun shopping in tech – did last month’s most significant deals. The largest strategic acquisition came from Visa, which plunked down $5.3bn for Plaid. Meanwhile, financial buyer Insight Partners double-dipped last month, spending $5bn for storage veteran Veeam and $1.1bn for IoT security startup Armis.