Deals on the rebound

Contact: Brenon Daly

More than 100 people dialed into our webinar earlier today, joining us in a discussion of whether the tech M&A rebound is real. And while not everyone agreed that deals will flow smoothly – and voluminously – in 2010, there was a shared sense that the M&A recession of 2009 has mostly lifted. Still, a rebound is one thing, while recovery is something else entirely.

We have definitely seen the pace of dealmaking pick up so far in 2010. We noted earlier that we tallied 60% more deals in the first workweek of this year than during the same period last year, and both tech investment bankers and corporate development executives have forecast a busier year for M&A in 2010. If you’d like to get a copy of our slides from this morning’s webinar, send us an email.

Companies buying early and often in 2010

Contact: Brenon Daly

Maybe it was just working through the backlog of deals from the holiday break, but M&A has started strongly in 2010. We previously noted that a number of big tech buyers have already announced deals this year. (The list of acquirers in the first workweek of January includes EMC, Oracle, Cisco Systems and Apple, among others.) Overall, we tallied 85 transactions in the first week back at our desks, a stunning 60% increase over the first workweek of 2009.

Granted, making projections from a single week is a bit dubious because of the small sample size. Yet while it may not be unerringly precise, it will likely prove directionally accurate. Consider how M&A played out in 2009. In the first week of January, we counted just 53 transactions, giving a projected total for the year of 2,756 deals. That turned out not to be too far off the actual total for 2009 of 3,005 transactions.

If we make the same calculation based on the 85 deals that we counted in the first workweek of this year, we get a projected total of 4,420. That will likely prove too high for the year since it would substantially eclipse the record activity we saw in the boom year of 2006, when there were a lot more buyers at the table. Still, the busy start to 2010 does appear to indicate that this year will be more active than last year. If you are interested in our full outlook for M&A in 2010, join us on our webinar tomorrow at 10:00 a.m. PST/1:00 p.m. EST. To register, click here.

Survey says: Companies ready to deal again

Contact: Brenon Daly

This year’s fast start to M&A activity by several of the big-name tech buyers (EMC, Cisco Systems, Apple and Oracle, among others) shouldn’t surprise us at all. After all, when we surveyed corporate development executives last month, two-thirds of them said they expected their firms to pick up the pace of dealmaking in 2010. That’s a far more bullish outlook than their projections last year, when the entire financial services industry and much of the broader economy appeared to be collapsing. At that time, some 23% of respondents said they expected to actually slow their acquisition activity amid all the uncertainty that loomed in the coming year. In our most recent survey, just 5% said they see a slowdown in dealmaking.

We’ll have a full report on the results of our annual 451 Group Tech Corporate Development Outlook Survey in tonight’s Daily 451 and 451 TechDealmaker sendouts. But we would add that the bullishness for M&A in the coming year expressed by our respondents extends far beyond just their projected activity. In both the types of transactions and even the structure of them, companies indicate that they have thrown off much of the conservatism and caution that characterized their outlook in late 2008 and are once again open to risk. And finally, they plan to be busy even though they tell us they’re likely to pay more in the deals they ink in 2010. It’s a dramatic turnaround from the previous year, so look for the full report on the survey tonight.

Projected change in M&A activity in the coming year

Year Increase Stay the same Decrease
2009 68% 27% 5%
2008 44% 33% 23%

Source: The 451 Group Tech Corporate Development Outlook Survey

A happy New Year

Contact: Brenon Daly

Much is made about how the opening days of trading tend to set the tone for the equity markets each year. (If that’s the case, Monday’s strong performance of both the Dow Jones Industrial Average and the Nasdaq Composite Index would indicate a pretty bullish 2010.) And since there is a correlation between the equity markets and the M&A market, we thought we’d note that deal flow in the New Year is also starting strong. The first full business day of 2010 saw big-name acquirers such as EMC and Thomson Reuters both reach for startups.

Actually, the opening flurry of deals in 2010 continues a pickup in M&A that really took hold in the final quarter of 2009. With the US economy growing again in the fall – after a year and a half of contraction – companies started shopping again. (The 12% surge in the Nasdaq in the fourth quarter also undoubtedly helped confidence.) With a few late-2009 deals still to tally, we project spending on fourth-quarter tech M&A will come in at about $55bn. That’s the highest level since the second quarter of 2008 and represents a 45% increase over spending in the fourth quarter of 2008. As for the outlook for the balance of 2010, two-thirds of tech bankers we recently surveyed told us their pipelines are fuller now than they were a year ago.

Quarter-by-quarter M&A totals, 2008-09

Period Deal volume Deal value
Q1 2008 839 $57bn
Q2 2008 719 $173bn
Q3 2008 733 $32bn
Q4 2008 724 $38bn
Q1 2009 659 $10bn
Q2 2009 770 $48bn
Q3 2009 757 $38bn
Q4 2009 784 $55bn

Source: The 451 M&A KnowledgeBase