- M&A Leaders Survey: Technology Dealmaker Sentiment Slow to Rebound
- Tech deals see modest gains in 2013, though economic uncertainty remains
Tech dealmakers are cautiously optimistic that M&A activity will increase in 2013, according to the third M&A Leaders Survey issued by global law firm Morrison & Foerster and syndicated technology research and advisory firm 451 Research. Slightly more than half of the respondents (54 percent) predicted their M&A activity would increase this year, which splits the difference in forecasts from the two previous survey findings of 49 percent in October 2012 and 59 percent in April 2012.
Survey respondents took stock of factors they thought would have the most influence on deal activity through 2013. Topping the list was the recent rise of the public equity markets – nearly two thirds said a healthy U.S. stock market would give a strong boost to M&A. Other positive factors included robust U.S. corporate growth rates, and competition among both strategic buyers and financial acquirers. Dealmakers saw minimal negative impact from U.S. tax and regulatory policy that might inhibit M&A.
“It’s encouraging to see executives forecasting an advance in deal activity this year in the face of challenging macroeconomic conditions and the continued slump in some tech segments,” said Morrison & Foerster corporate partner Robert Townsend, co-chair of the firm’s global M&A practice. “Although the outlook appears evenly split right now, some clarity in the overall economy could buoy the market, especially if stocks continue to rise.”
Respondents also noted that the pace for tech deals is gaining momentum. Although the margin was slim, respondents were more likely than not to say their M&A activity had ticked upward in the past six months; just more than 40 percent indicated they were busier. The gap is nearly identical to the survey findings from October.
“Many tech companies are looking to grow and take advantage of any recovery,” said Michael O’Bryan, of Morrison & Foerster’s M&A group. “The large amount of cash on their books and the availability of low interest financing give them the means to pursue opportunities, though they remain cautious in choosing which to pursue.”
Dealmakers also forecasted an increase in valuations for private companies. Nearly 53 percent of respondents foresee private company valuations increasing in 2013 – with only 14 percent expecting a decline.
However, economic uncertainty still lingers as the prevalent theme tempering the tech market. Nearly 30 percent of those polled predicted that dealmaking will remain flat through 2013, and roughly 20 percent projected that acquisition activity would decrease this year.
Noting a substantial 20 percent decline in overall tech sector M&A spending in 2012, the survey asked participants to assess which macro factors gave them greatest pause in their own deal execution. Doubts over economic growth loomed large – nearly 80 percent of respondents blamed sluggish growth as a drag on deals. In the January-March quarter, the number of acquisitions announced by tech buyers across the globe sank to 763, the lowest level since Q3 2009.
The M&A Leaders Survey continues to provide insights into how dealmakers maximize their results. In this survey, respondents noted some of the potential advantages of using a buyer’s stock to pay for all or some of an acquisition, including the ability to defer some potential capital gains taxes and to share some of the upside (and risk) of the transaction between the parties, though they also confirmed their inclination to use cash to fund acquisitions for the sake of speed and simplicity.
The M&A Leaders Survey is designed to take the pulse of tech industry insiders on the dealmaking market, and represents the views of nearly 200 investment bankers, venture capitalists, financial advisers and senior executives. Demographically, the majority of M&A Leaders Survey participants (more than one-third) are based in Silicon Valley and Northern California, with most responses coming from the information technology industry, followed by life sciences and medical devices.
Read the full report : http://www.mofo.com/files/Uploads/Images/130510-451-Survey-Results.pdf.