April 29, 2013 – Technology industry mergers and acquisitions continue to dive, but software deals and IPOs suggest positive activity in the months ahead, according to PricewaterhouseCoopers.
With 40 deals at a combined total of $8.34 billion in the first quarter of 2013, tech industry transactions registered its lowest marks since the global recession reverberated that into 2009, according to PwC’s quarterly industry review. There were 25 fewer deals than in the final quarter of 2012, with a 60 percent reduction in value compared with that same quarter.
Overall, PwC points to macroeconomic factors – particularly sluggish conditions in Europe and the “sequestration” cuts in the U.S. – as the cause behind sluggish mergers and acquisitions. More anecdotally, the firm sees more internal and enterprise investment in services and offerings that focus on efficiency as a source of reduced spending on enterprise IT in general.But PwC touted the continued strength in software subsector M&As and the role of IPOs as good news amid these dismal figures. There was the same number of software transactions (21) in the first quarter of this year as in the last quarter of 2012. The deal value in the first portion of 2013 was $5.71 billion, which was about half the deal value shown in the final quarter of last year. However, the other tech industry sectors of hardware, semiconductors, IT services and Internet vendors saw drastic volume and value cuts between the two quarters. There was also a push to make deals before the end of last year in order to avoid unknown tax implications. As economic factors are expected to relax, PwC anticipates software to continue as a hearty source of deals, especially as industries outside of traditional enterprise IT integrate software products and services to the point where they “add the innovators that develop these tools to their M&A shopping list.”
PwC counted seven IPOs placed in the first quarter of 2013, with proceeds reaching nearly $1 billion. Both of those numbers are below the volume and value of IPOs during the last three months of 2012. Nonetheless, PwC indicates they represent a “strong start” to the year compared with the beginning of 2012, including a one-day average return of 27 percent, the most of any industry, with new registrations growing more than 40 percent in the first quarter of 2013. The advisory noted that investors “may have finally shaken off the jitters” from Facebook’s IPO, which has seen its own healthy rebound.
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