Two different paths to the top

by Brenon Daly

Although 2018 is closing in on the record year of 2015 for overall tech M&A spending, it’s taken a much different route to arrive at the same heights. Both years total more than a half-trillion dollars in announced deal value, which puts them above all other years since the internet bubble burst in 2000.

And while it’s true that both years are characterized by big spending, only 2015 stands as the year of the big spender. Two of the three largest tech transactions announced this century are 2015 vintage. Taken together, 2015’s two blockbusters (Dell-EMC, Charter Communications-Time Warner Cable) contributed a staggering $120bn, or 21%, of that year’s total announced deal value of $575bn, according to 451 Research’s M&A KnowledgeBase.

In contrast, this year’s largest print only slots in seventh place on the list of biggest acquisitions since 2000. When that deal (Comcast-Sky) is combined with the second-largest transaction (IBM-Red Hat), spending totals just $72bn, fully 40% lower than the total value of the 2015 pair. Or look at it this way: Only one out of every eight dollars of this year’s spending has come from the two massive deals, compared with one out of every five dollars in 2015.

What 2018 has lacked in heights, however, it has made up for in volume. Lots and lots (and lots) of single-digit-billion dollar deals all piled up together. Already this year, the M&A KnowledgeBase lists 96 tech transactions valued at $1-$10bn, up from 75 similarly sized deals in 2015.

Granted, most of this year’s steady flow of billion-dollar prints came from many of the names – both strategic and financial – that we would expect to be putting up big deals. But probably more significant for 2019 and beyond is the fact that this year saw some new entrants to the ‘billion-dollar club.’

Workday and Twilio had never even announced a $100m+ transaction before inking a $1.6bn and $1.7bn acquisition, respectively, in 2018. BlackBerry more than tripled the size of its largest purchase, paying $1.4bn for endpoint security startup Cylance in November. With new acquirers flashing big bankrolls and showing off confidence, the buying pool at the top end of the tech M&A market just got a little deeper.

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Posted in M&A