August 13, 2012 – Tech mergers and acquisitions may be down as a reflection of the overall global economy, but software and on-demand offerings represent a greater role as more enterprises buy into cloud and SaaS resources, according to a new industry assessment.
Analyst firm PricewaterhouseCoopers on Monday released its analysis of disclosed technology sector deals valued at greater than $15 million for the second quarter of 2012. Through an overall unstable global economic situation, tech sector deals represented one-fifth of all transactions so far in 2012, according to the firm’s report. There were 55 mergers and acquisitions during the second quarter, down from 65 in the first three months of the year but reflecting an 8 percent jump in value to $31.8 billion. By comparison, there were 85 deals in the second quarter of 2011 with a cumulative value of $26.8 billion.
Deal values and volume in software and Web-based offerings were both down in the second quarter of 2012 compared with that same period last year, though both contributed equally to a greatly increased portion (58 percent) of the overall tech market transactions. IT services, too, was down (six deals for $1.38 billion) in the second quarter of 2012 compared with the second quarter of 2011, though it also represented a greater portion of the overall tech market transactions.
PwC Director of Transaction Services Aaron Higley said that the business-side interest and wide range of adoption possibilities in cloud-based services has enabled deals in the IT services, software and Internet spaces to hold their own as other areas like semiconductors show a drastic drop off from economic instability.
“The adjustment in merger and acquisition focus on cloud-related businesses is a natural result of this broader shift as companies execute on corporate strategies to incorporate cloud-based products and services into their portfolios, either organically or inorganically with mergers and acquisitions,” Higley says. “Internet-based services have been a key player in recent deals, and have crossed the spectrum of sectors including on-line games, software security, e-commerce and the infrastructure that supports these deals. Internet-based software products have become more and more prominent and this trend is likely to continue.”
In terms of value, however, hardware still ruled tech sector transactions. Led by Google’s buy of Motorola Mobility and other deals by LAM and Agilent, hardware mergers and acquisitions represented 65 percent of total deal value in the second quarter of 2012.
To access the PricewaterhouseCoopers quarterly report, click here.