Press Release

Morrison & Foerster and 451 Research Launch New "M&A Leaders Survey" Covering Tech-Sector Deals

15 May 2012

NEW YORK and SAN FRANCISCO (May 15, 2012) – Tech-sector mergers and acquisitions were noticeably down in the first quarter of 2012. But despite the sluggish start, many top technology companies expect M&A activity to accelerate during the rest of the year, as businesses expand product and service portfolios and execute on long-term growth plans.

Those are among the key findings from a new survey of tech-sector dealmakers launched by Morrison & Foerster, a leading global law firm, and 451 Research, the research division of prominent technology market intelligence firm 451 Group.

The results of the new MoFo/451 Research M&A Leaders Survey are based on a broad sampling of CEOs, CFOs and in-house counsel, venture capital and private equity firms, and investment bankers and outside lawyers, conducted in late March and April. More than 300 deal professionals and business leaders participated in the survey. Respondents represented several industry sectors, with the largest group of corporate respondents coming from information technology companies.

Morrison & Foerster and 451 Research intend to provide findings and analysis from the survey in several releases and programs in the near future. Here are a number of the key findings:

    1. Deal Activity on the Rise? – Slightly more than half of the respondents (52%) said they’ve seen more deal activity during the past six months than during the same period in 2011 or 2010. Looking ahead, a healthy 59% expect 2012 to end with a greater volume of done deals than 2011. In contrast, only 8% project their deal total will be lower this year than last. The continued activity reflects both the potential for deal volume to rebound, as well as the increasing amount of work being put into individual deals as participants seek to increase certainty and returns from their investments.

    2. Key Transaction Drivers – Respondents had strong views as to the factors most likely to propel M&A activity the rest of this year. Chief among them: delivering on long-term growth (87%) and filling in existing product and service portfolios (83%), followed by entering new geographic markets (43%) and diversifying lines of business (42%). A smaller group (29%) said they’re on the prowl opportunistically to take advantage of attractive prices of target companies.

    3. Patents Take Back Seat – Despite a recent spate of patent transactions between such major players as Google-Motorola Mobility and Facebook-Microsoft, only 20% of respondents said that they regard protecting IP rights as a strong driver for M&A transactions. Nearly half of respondents (47%) said that patents don’t play a significant role in their acquisitions. This surprise finding suggests that while some big companies are making aggressive plays for IP assets for both offensive and defensive purposes, such moves appear to be limited to certain industries like mobile devices and digital printing.

    4. Deal Drags – Asked to account for the decrease in spending on mergers and acquisitions thus far in 2012, respondents cited doubts about the sustainability of the U.S. economic recovery and concerns over the European debt crisis as the two most important factors. A smaller number noted the uncertainty surrounding this year’s presidential election.

    5. Prices: Which Way Is Up? – While many would-be acquirers see current valuations as inflated, they’re not holding their breath waiting for prices to come down, at least when it comes to private acquisitions. Fewer than 10% of survey respondents said they expect to see a decline in private company valuations in 2012, while nearly half (47%) predicted valuations would stay about the same as last year, and more than 40% said private company prices would actually increase. The continued availability of the IPO market as an alternative to a sale is one factor giving private companies additional negotiating leverage and confidence.

The newly issued M&A Leaders Survey is the first in a planned series of biannual reports jointly issued by Morrison & Foerster, one of the country’s top legal advisors in M&A, and 451 Research, a leading provider of market intelligence and analysis for the tech industry.

“We’re excited to team with 451 Research to produce our first M&A Leaders Survey, which is designed to provide insight into current deal drivers – as well as deal inhibitors – in M&A, particularly in the tech sector,” said MoFo partner Robert Townsend, who co-chairs the firm’s Global M&A Practice. Mr. Townsend has been at the center of some of the largest tech deals of the past several years, including advising Intel in its $7.7 billion acquisition of Internet security leader McAfee Systems, its follow-on $1.4 billion purchase of Infineon’s wireless division, and the $3.3 billion stock-for-stock merger between Lam Research and Novellus.

“We hope the insight and intelligence gleaned from our survey will be a big help to both company insiders and their advisors in navigating the strategic acquisition market,” he added. “It will be interesting to see how attitudes evolve in our next survey, particularly in the wake of the presidential election, and the continuing economic stress in Europe.”

Brenon Daly, director of research for M&A at 451 Research in San Francisco, said of the survey: “We wanted to offer tech companies and dealmakers actionable information from their peers on the M&A landscape. We hope our findings will serve as an important benchmark that can enhance their real-time decision making as they consider embarking on major transactions. We’re pleased to be partnering with Morrison & Foerster on this survey of thought leaders.”

Here are other noteworthy findings from the survey:

    6. Sticking Close to Home – Despite a near-constant buzz about capturing China and other overseas markets, would-be acquirers appear to be focused on deals closer to home. Over 60% of respondents said that their potential acquisition targets are either wholly based in the U.S. or largely so. Only 12% of executives said that their M&A targets are either mostly or entirely based outside the U.S. A quarter said their deals are evenly split between domestic and foreign targets. Interestingly, 11% said they could adequately meet international needs by acquiring U.S. firms with global operations and growth prospects.

    7. Cross-Border Challenges – Companies that considered, but ultimately didn’t pursue, cross-border acquisitions pointed to a number of challenges. The #1 stop sign was concern over integration risks, a concession to the practical hazards of combining companies in wholly different markets. Other major factors were concerns over diligence and transaction risk and lack of visibility into overseas markets.

    8. Competition for U.S. Targets From Abroad – Conversely, respondents believe that more acquirers from abroad are joining the hunt for U.S. domestic targets. More than a quarter of respondents reported that they already face significant competition from overseas buyers, and that they expect that competition to increase. Just under half of the respondents (49%) said that while they currently don’t have to fend off overseas acquirers, they believe the number of foreign buyers vying for U.S. companies is likely to rise.

    9. The Inside View on Earnouts – Respondents had a surprisingly favorable (or at least grudgingly practical) view of earnouts as an acquisition technique. More than 80% said their company (or their client company) included earnout clauses in M&A agreements during the past two years. Among that group, over 30% reported that they’ve used earn-out clauses in over one-half of their transactions over that period.

    • Earnout Metrics: As for which yardsticks work best for measuring earnout-related performance, nearly half of respondents pointed to achievement of revenue targets, while roughly one-fourth cited achieving profitability goals.

    • A Recipe for Conflict?: Almost three-quarters of those who’ve used earnouts said such clauses have led to subsequent disputes or litigation; nearly one-fifth of respondents estimated there had been post-deal conflict over earnouts up to half of the time. An unlucky 10% of participants said that the use of earnouts had led to disputes or lawsuits more than 75% of the time.
    10. Earnout Alternatives – Asked which other mechanisms might work for closing valuation gaps, respondents cited joint ventures, licensing agreements, and use of buyer or seller debt as viable alternatives

MoFo’s Rob Townsend noted that the near-term picture that tech companies and their advisors provided of the M&A market is definitely mixed. “For all the positive signs of a resurgence in deals, there are a number of flashing yellow lights,” he said. “Yet in reviewing the key drivers for more activity, we’re encouraged that companies are focused on fundamental goals such as the build-out of product lines, advancing long-term growth plans and penetrating new markets, which reflects a mature and very strategic outlook. Couple that with executives’ unwillingness to overpay for targets and we think the market for technology M&A is behaving quite rationally. We look forward to getting another read on the deal scene for our next M&A Leaders Survey later this fall.”


About Morrison & Foerster: Morrison & Foerster ( is one of the world’s premiere advisors on mergers and acquisitions, with a strong expertise 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: 

  • Intel on its $7.7 billion acquisition of McAfee (closed Feb. 2011) 
  • Hitachi in the $4.8 billion sale of its hard disk drive and data storage business, Hitachi Global Storage Technologies, to Western Digital (closed Mar. 2012) 
  • Novellus Systems, Inc. in its $3.3 billion sale to Lam Research Corp. (announced Dec. 2011) 
  • Terumo Corporation, in its $2.6 billion acquisition of CaridianBCT (closed April 2011) 
  • Toshiba Corporation in its $2.3 billion acquisition of Landis+Gyr AG (closed July 2011)
  • The Special Committee of the Board of Directors of 99¢ Only Stores in the $1.6 billion acquisition of the company by Ares Management LLC and Canada Pension Plan Investment Board (closed Jan. 2012)
  • ICO Global Communications (now Pendrell) in a $1.5 billion restructuring transaction involving the sale of certain assets to DISH Network 
  • Toshiba Tec, in its acquisition of IBM's Retail Store Solutions business for approximately $850 million (announced April 2012)

About 451 Research: 451 Research (, a division of The 451 Group, is focused on 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 DC, London, Boston, Seattle and Denver.




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