News Feed Item

Strong Fundamentals Set the Stage for Technology Deals Uptick in 2014, According to PwC US

Abundance of Cash Reserves from Technology Majors and Record Levels of Private Equity Capital Fuel Deal-making in 2014

SAN JOSE, Calif., Feb. 20, 2014 /PRNewswire/ -- With a strong finish in technology deal activity in 2013, the outlook for 2014 points towards an accelerated pace as technology M&A continues to play a critical role for companies across industries to innovate and drive growth, according to PwC's US Technology Deals Insights 2013 Year in Review and 2014 Outlook report released today.

PwC logo.

As companies look to talent, technology and portfolio additions to keep up with the pace of change, PwC expects the recent strength in technology deal activity to set the stage for a robust 2014, but with subdued levels of large platform acquisitions.

"Disruptive technologies are driving change at a dizzying pace, heightening the need for continuous innovation. M&A is playing an instrumental role for larger technology enterprises seeking to achieve growth," said Rob Fisher, PwC's US technology deals leader. "The abundant cash and marketable securities held by the top 25 technology companies at year end, and the record levels of capital being raised by private equity funds, is creating a tremendous atmosphere for technology M&A in 2014."

According to Deal Insights, cumulative technology deal value for 2013 closed at $99.8 billion, a decrease of three percent from 2012.  A blossoming IPO market and growing valuations impacted mid-market deal volumes while overall value for the year was upheld by deals larger than $500 million.  Total deal volume declined 18 percent ending the year at 204 closed transactions in 2013 compared to 249 deals closed in 2012.  The increase in billion dollar deals resulted in average deal size increasing from $415 million in 2012 to $489 million in 2013.

Technology IPOs accounted for 16 percent of IPO value and 21 percent of IPO volume in 2013 and PwC anticipates continued growth in the technology IPO pipeline.  In total, there were 51 IPOs, a substantial increase from 39 in 2012.  

PwC finds that stabilization in global economies is paving the way for growth in cross-border deal activity with this trend continuing in 2014 as corporate and private equity buyers look to emerging markets for higher returns and accelerated growth trajectories. Domestic transactions comprised 62 percent of deal volume and 81 percent of deal value in 2013, compared to 71 percent of deal volume and 76 percent of deal value in 2012. 

The report finds that software, accounting for 35 percent of technology M&A volume in 2013, remains at the forefront of technology deals as technology companies continue to expand into the cloud, mobility continues to grow, and more companies across industries leverage big data analytics.

  • The lines between the Software and Internet sectors continue to fade, and cumulative value for the combined sub-sector deals representing 35 percent of total 2013 deal value, a decrease from 53 percent in 2012 largely due to a decline in billion-dollar software deals.
  • The hardware sector showed mixed results, with the volume of transactions declining 22 percent but cumulative deal value increasing by 37 percent.
  • The semiconductor sector showed strength in 2013 and represented 16 percent of overall technology transaction volume (33 deals) with a cumulative deal value of $10.7 billion, a 32 percent increase in value from 2012.
  • IT services have similarly shown growth in 2013 with a 10 percent increase in volume and 32 percent increase in value, resulting in 34 deals closed and a cumulative deal value of $7.8 billion.

Despite the continued availability of cheap high yield and leveraged financing, and buoyant equity markets, private equity deal volume declined for the first time since 2009.  Private equity deals comprised 31 percent of total technology deals with disclosed values in 2013 compared to 34 percent in 2012.  

"2014 appears to have strong fundamentals for an increase in private equity deals. However, competition between financial and strategic buyers for high quality assets remains strong.  Given the inherent ability of strategic buyers to justify higher valuations from synergies, we expect the trend of more private equity investments in the form of growth investments and add-on acquisitions to continue," added Fisher.

PwC found that divestiture activity remained strong during a robust IPO market as corporate buyers continued to optimize portfolio strategies.  Divestiture transactions in technology increased 3 percent in 2013 to near 2009 and 2010 levels with 321 divestitures recorded in 2013 compared to 311 in 2012.  Technology divestitures as a percent of total technology M&A volume rose from an average of 20 percent in 2012 to 22 percent 2013 in light of an overall decline in divestiture deal volume.

Cumulative divestiture deal value for transactions with disclosed deal values reached $17.9 billion in 2013 compared to $31.2 billion in 2012, a decrease of 42 percent. The top 10 divestitures of 2013 represented 81 percent of this value, an increase from 2012, when nearly 60 percent of total disclosed deal value was represented by the top 10 divestitures.

"User experience, new revenue models and process efficiencies will be at the heart of what technology companies want to accomplish with deal activity in 2014.  The underlying theme is to enable intelligence for everything across industries," added Fisher.

The report outlines the following drivers for 2014 technology deals:

  • Analytics Evolves. With large amounts of accumulated data, companies are evolving their approach to turn big data into actionable intelligence and improve user engagement with the business. PwC expects 'Big Data' to remain an active area of technology M&A.
  • Building social, mobile and cloud platforms. Home grown platforms are often favored due to strategic and profit motives, but not all ecosystems are winners. As a result, companies continue to expand with proven platforms via acquisition in order to improve their offerings in cloud, social and mobile.
  • Software-defined and the industrialization of hardware. With the increasing difficulty to generate a competitive advantage in building hardware, software continues to bring intelligence to bear by automating tasks, increasing technological capabilities and democratizing complex technology processes. PwC expects more software acquisitions that enable users to orchestrate traditional hardware tasks with software.
  • Context awareness is key. As services continue to dominate the technology offering landscape, understanding how, when, where, and why someone is using the service is increasingly important. Areas such as local and social software, sensor technology, and mobile applications are among the components that will continue to drive acquisition interests.
  • Technology is pervasive across industries. Technology companies of all shapes will focus on driving more industry specific solutions across health care, retail, banking, and industrial products among others. PwC anticipates that acquisitions will be a key vehicle for this activity.
  • Security concerns continue unabated. From government information leaks to retail chain customer data, it is clear that more needs to be done to secure information - especially with the continued move to cloud and mobile technologies. PwC projects continued progress for large technology companies acquiring new security capabilities in 2014.
  • Interface technologies and endpoints. From media consumption, transportation, or energy usage, increasingly our "things" are connected digitally. The ways in which consumers interact with their devices is also evolving, which includes touch, voice, facial recognition, among others. In 2014, PwC expects continued focus on innovations in these areas with large technology companies looking for new capabilities.

PwC's US technology Deals Insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $15 million, as provided by Thomson Reuters through December 31, 2013 and supplemented by additional independent research.  Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  

Our local and global deal strength is derived from over 1,400 deal professionals in 21 cities in the U.S. and over 9,800 deal professionals across a global network of firms in 75 countries.  In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.  

For more information about M&A and related services in the technology industry, please visit www.pwc.com/us/deals or www.pwc.com/technology.

About PwC US 
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Logo: http://photos.prnewswire.com/prnh/20100917/NY66894LOGO


More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, will demonstrate how to move beyond today's coding paradigm ...
Although it has gained significant traction in the consumer space, IoT is still in the early stages of adoption in enterprises environments. However, many companies are working on initiatives like Industry 4.0 that includes IoT as one of the key disruptive technologies expected to reshape businesses of tomorrow. The key challenges will be availability, robustness and reliability of networks that connect devices in a business environment. Software Defined Wide Area Network (SD-WAN) is expected to...
SYS-CON Events announced today that StarNet Communications will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. StarNet Communications’ FastX is the industry first cloud-based remote X Windows emulator. Using standard Web browsers (FireFox, Chrome, Safari, etc.) users from around the world gain highly secure access to applications and data hosted on Linux-based servers in a central data center. ...
OnProcess Technology has announced it will be a featured speaker at @ThingsExpo, taking place November 1 - 3, 2016, in Santa Clara, California. Dan Gettens, OnProcess’ Chief Analytics Officer, will discuss how Internet of Things (IoT) data can be leveraged to predict product failures, improve uptime and slash costly inventory stock. @ThingsExpo is an annual gathering of IoT and cloud developers, practitioners and thought-leaders who exchange ideas and insights on topics ranging from Big Data in...
Developing software for the Internet of Things (IoT) comes with its own set of challenges. Security, privacy, and unified standards are a few key issues. In addition, each IoT product is comprised of (at least) three separate application components: the software embedded in the device, the back-end service, and the mobile application for the end user’s controls. Each component is developed by a different team, using different technologies and practices, and deployed to a different stack/target –...
Virgil consists of an open-source encryption library, which implements Cryptographic Message Syntax (CMS) and Elliptic Curve Integrated Encryption Scheme (ECIES) (including RSA schema), a Key Management API, and a cloud-based Key Management Service (Virgil Keys). The Virgil Keys Service consists of a public key service and a private key escrow service. 

SYS-CON Events announced today that CDS Global Cloud, an Infrastructure as a Service provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. CDS Global Cloud is an IaaS (Infrastructure as a Service) provider specializing in solutions for e-commerce, internet gaming, online education and other internet applications. With a growing number of data centers and network points around the world, ...
Big Data has been changing the world. IoT fuels the further transformation recently. How are Big Data and IoT related? In his session at @BigDataExpo, Tony Shan, a renowned visionary and thought leader, will explore the interplay of Big Data and IoT. He will anatomize Big Data and IoT separately in terms of what, which, why, where, when, who, how and how much. He will then analyze the relationship between IoT and Big Data, specifically the drilldown of how the 4Vs of Big Data (Volume, Variety,...
SYS-CON Events announced today that Tintri Inc., a leading producer of VM-aware storage (VAS) for virtualization and cloud environments, will present at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Tintri VM-aware storage is the simplest for virtualized applications and cloud. Organizations including GE, Toyota, United Healthcare, NASA and 6 of the Fortune 15 have said “No to LUNs.” With Tintri they manag...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
From wearable activity trackers to fantasy e-sports, data and technology are transforming the way athletes train for the game and fans engage with their teams. In his session at @ThingsExpo, will present key data findings from leading sports organizations San Francisco 49ers, Orlando Magic NBA team. By utilizing data analytics these sports orgs have recognized new revenue streams, doubled its fan base and streamlined costs at its stadiums. John Paul is the CEO and Founder of VenueNext. Prior ...
SYS-CON Events announced today that eCube Systems, the leading provider of modern development tools and best practices for Continuous Integration on OpenVMS, will exhibit at SYS-CON's @DevOpsSummit at Cloud Expo New York, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. eCube Systems offers a family of middleware products and development tools that maximize return on technology investment by leveraging existing technical equity to meet evolving business needs. ...
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect...
Ask someone to architect an Internet of Things (IoT) solution and you are guaranteed to see a reference to the cloud. This would lead you to believe that IoT requires the cloud to exist. However, there are many IoT use cases where the cloud is not feasible or desirable. In his session at @ThingsExpo, Dave McCarthy, Director of Products at Bsquare Corporation, will discuss the strategies that exist to extend intelligence directly to IoT devices and sensors, freeing them from the constraints of ...