November 9, 2012 – Mergers and acquisitions in software, cloud and Web-based sectors took up a greater proportion and value in the third quarter than in previous months, a strong point in a tech industry transaction period marked by election hesitancy and flat activity.
PwC’s U.S. Technology M&A Insights is a quarterly look at transactions with a disclosed deal value of greater than $15 million through Sept. 30. In the third quarter of 2012, there were 59 deals that closed, just one more than during the previous three months, and a total deal value hit $20.5 billion.
By comparison, the third quarter of 2011 tallied 78 transactions for a value of $26.6 billion, according to the firm’s figures.
The presidential election and the threat of a “fiscal cliff” have put many deals and IPOs on the backburner for the quarter, and probably the rest of the year, the transaction analysis firm stated. That could push more mid-market activity as well as spin offs or divestures, though buyouts by large vendors and other “mega-deals are more likely to wait until 2013.”
Software and Internet or cloud-based M&A totaled 59 percent of deal volume and 78 percent of deal value ($14.2 billion) during this past quarter. While that is the same number of transactions as during the second quarter of 2012, Q3 deals reflected a 61-percent increase in value from the previous quarter.
“The third quarter [of 2012] seemed to place an exclamation point on the shift away from transactions in the hardware and traditional manufacturing-based technology businesses, as software and cloud-based companies dominated deal activity for the period generating a significant portion of deal value,” PwC report authors summarized.
Hardware, semiconductor and IT services plateaued from the previous quarter, though the total deal value for all three segments dropped 22 percent in the third quarter of 2012. PricewaterhouseCoopers wrote that the new year holds the possibility of a new wave of acquisitions across these three areas as large tech vendors review their portfolios and seek out the potential higher returns from software and service offerings.
The largest deals announced during the third quarter were Micron’s $2.5 billion offer for DRAM manufacturer Elpida Memory and IBM’s $1.3 billion proposal for on-premise and cloud talent management provider Kenexa. Top closed transactions during the quarter were Cicso’s $5 billion deal for NDS Technologies and Dell’s $2.4 billion purchase of Quest Software.