SAN FRANCISCO (May 10, 2013) – 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 here: http://www.mofo.com/files/Uploads/Images/130510-451-Survey-Results.pdf
About Morrison & Foerster: Morrison & Foerster (www.mofo.com) is one of the world's premier advisers on mergers and acquisitions, with deep experience in technology-related deals. The firm's global corporate group has played a lead role in many of the largest technology M&A transactions of the past two years. Recent advisory assignments included representing:
- Softbank, a Japanese wireless carrier, in its acquisition of a 70 percent stake in wireless operator Sprint Nextel for an enterprise value of $43.5 billion. This deal is the largest acquisition or investment from Asia into the United States. (announced Oct. 2012)
- Equity Residential, a leading real estate investment trust, in a joint agreement with AvalonBay Communities to acquire a vast portfolio of U.S. apartment properties from the Lehman Brothers estate for approximately $16 billion. (closed Feb. 2013)
- DaVita Inc., a leading provider of kidney dialysis and other kidney care services, in its $4.42 billion acquisition of HealthCare Partners Holdings, LLC, a leading integrated healthcare services system. (closed Nov. 2012)
- Intel in its approximately $4.1 billion investments in Dutch chip-maker ASML. (announced May 2012)
- Union Bank N.A. in its $3.7 billion acquisition of the U.S. commercial real estate lending portfolio platform of PB Capital Corp., a wholly owned subsidiary of Deutsche Bank AG. (announced April 2013)
- Pinnacle Entertainment in its $2.8 billion acquisition of Ameristar Casinos, Inc. (announced Dec. 2012)
- SoftBank in Sprint Nextel's $2.2 billion acquisition of the 48 percent of Clearwire Corporation it does not already own. (announced Dec. 2012)
- Boyd Gaming Corp. in its $1.55 billion acquisition of Peninsula Gaming LLC. a world class casino and entertainment company. (closed Nov. 2012)
- Global Logistics Properties, one of the world's leading providers of modern logistics facilities, in its $1.4 billion joint ventures with Canada Pension Plan Investment Board, China Investment Corporation and the Government of Singapore Investment Corporation to acquire 40 properties in Brazil from funds managed by Prosperitas. (closed Nov. 2012)
- Arbitron Inc., an international media and marketing research firm, in its $1.3 billion acquisition by Nielsen Holdings N.V., a global provider of information and insights into what consumers watch and buy. (announced Dec. 2012)
About 451 Research: 451 Research (www.451research.com), a division of The 451 Group, is focused on the business of enterprise IT innovation. The company's analysts provide insight into the competitive dynamics of emerging technology segments, with a deep focus on mergers and acquisitions. Business value is delivered via daily published research, periodic deeper-dive reports, data tools, market-sizing research, analyst advisory, and conferences and events.
The company's clients – including vendor, investor, service-provider and end-user organizations – rely on 451 Research to support both strategic and tactical decision-making. 451 Research is headquartered in New York, with offices in key technology and financial markets, including San Francisco, Washington D.C., London, Boston, Seattle and Denver.