The total value of technology mergers and acquisitions (M&A) fell 35% in 2012 compared to 2011 on concerns of sluggish macroeconomic conditions, but cloud computing represented a bright spot, with software as a service (SaaS) companies specifically being a hot target for activity, according accounting firm Ernst & Young.
Total tech M&A deals amounted to $114 billion in calendar year 2012, compared to $175 billion in 2011. There were about the same number of deals last year compared to 2011, but they were worth less money. The average size of deals fell from $218 million in 2011 to $188 last year. The biggest bust in 2011 came from the lack of mega-deals: In 2011 there were 36 deals worth more than $1 billion; last year, there were only 28.
"The macroeconomic pressures that returned in late 2011 held down global technology M&A activity in 2012. But, that pressure also helped clarify what's important," says Joe Steger, Ernst & Young's tech industry services leader. "We saw growth in the strength of transformative megatrends social-mobile-cloud, big data analytics and accelerated adaptation while the really big-ticket deals pulled back. Heading into early 2013, the short-term outlook suggests a soft couple of quarters but the long-term outlook for technology M&A remains strong, as both technology and non-technology industries have an ongoing need to adapt to disruptive technology innovation."
The top tech M&A deals of 2012 were:
-Cisco buys NDS Group for $5 billion in March
-SAP AG acquired Ariba for $4.5 billion in May
-CGI Group acquired Logica PLC for $2.6 billion in May
-Dell bought Quest Software for $2.5 billion in July
-ASML Holding announced the acquisition of Cymer for $2.5 billion in October
Ernst & Young says despite tech M&A deals falling in 2012, the cloud market remained hot, and specifically SaaS companies. "Largely on the strength of SaaS growth, the cloud/SaaS megatrend ran away from the rest of the pack of deal-driving trends in 2012, growing to more than 15% of global technology M&A deal volume," the report states. Examples of large SaaS deals include Cisco's purchase of SaaS wireless access point management company Meraki for $1.2 billion, Citrix purchasing cloud-based mobile device management company Zenprise for $355 million, and Oracle snapping up cloud-based human capital management firm Taleo ($2 billion) and marketing automation SaaS company Eloqua ($956 million).
Another trend Ernst & Young noticed was around non-tech companies buying into the technology industry, such as John Wiley & Sons, a publishing company buying online learning company Deltak for $220 million.
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