handshakeTech industry insiders are more optimistic regarding the pace of mergers and acquisitions (M&A), with “a slight plurality” saying that there has been more deal activity over the past six months than at any time in the past two years, according to Morrison & Foerster’s (M&F) 4Q 2013 “M+A Leaders Survey.”

Tech industry insiders expecting M&A activity to gain more momentum over the next six months outnumbered those expecting a slowdown by a 7 to 1 margin. In addition, more respondents expect an increase in the number of bidders vying for deals – “two distinct markers for more deal traction,” according to M&F’s report, which was produced in partnership with 451 Research.

Forty percent of respondents reported an increase in M&A activity over the past six months compared to 36% who said there had been less activity.

Advertisement

Greater optimism is evident looking ahead. The percentage of those expecting M&A activity to increase  was 50%, compared to just 7% who are expecting a contraction. That’s significantly more bullish than the previous survey from April 2013, when nearly 20% of respondents anticipated a decline.

Globally, tech industry M&A is down 15% from a year ago, and more than that since the corresponding period in 2011. “The prolonged downturn may be a secular – rather than cyclical – change in the multi-billion dollar tech M&A market,” Daly writes. “More than a few buyers and advisers say they are adjusting their acquisition plans to this ‘new normal.’”

“Significant deal-making opportunities” continue to present themselves nonetheless, M&F notes, particularly for “clients pursuing large, high-profile M&A deals, such as the $21.6 billion acquisition by SoftBank of Sprint, and Sprint’s $4 billion acquisition of Clearwire.”

Looking out five years, 40% of survey respondents said they believed tech industry M&A will return to pre-recession levels. Another 31% believe there is a 50-50 chance of that occurring. M&A spending would have to roughly double to regain levels seen in 2006-2007, M&F notes.

“Valuations for the largest consolidators need to come back,” one survey participant stated, while another pointed out that “the desktop business is being disrupted by cloud, mobile and app vendors . . . if the large vendors do not acquire they will become disrupted.”

“What’s needed,” said a third, is a “continued active IPO market so the buyer universe is expanded.” Elaborating on this point, another respondent commented,“The stage is being set with a significant group of newly public companies who will be transitioning into M&A mode as they settle into being public.”

Join the Conversation

Leave a Reply

Your email address will not be published.

Don’t Miss Any of Our Content

What’s happening with broadband and why is it important? Find out by subscribing to Telecompetitor’s newsletter today.

You have Successfully Subscribed!