MoFo Tech M&A Survey Predicts U.S. to Remain Hot; Bolt-Ons to Increase
San Francisco (May 7, 2015) – A majority of respondents representing multiple sectors of the technology M&A community forecast acquisition activity in 2015 tracking to its strongest year since the Internet bubble burst in 2000, according to the latest M&A Leaders Survey. The survey, conducted jointly by Morrison & Foerster and tech market intelligence firm 451 Research, reveals that over 6 in 10 respondents expect to see an increase in the number of tech M&A transactions this year, with over 15 percent of those expecting an increase predicting a “significant” increase over 2014 levels.
The twice-yearly M&A Leaders Survey, now in its seventh edition, examines significant developments in deal terms, as well as sentiment and trends in key technology markets across the U.S., and the most active countries and regions internationally.
“Coming off of a landmark year in M&A, it’s encouraging to see that industry leaders remain confident in months to come,” said Robert Townsend, co-chair of Morrison & Foerster’s Global M&A Practice Group. “Now roughly a quarter into the year, we see no signs of dealmaking slowing down across most key technology subsectors.”
In addition to an anticipated rise in tech M&A activity, a majority of respondents also expect private company valuations to either rise or stay the same as 2014. The number of IPOs is also expected to either remain at or increase over 2014 levels, the survey found.
“The data helps piece together a comprehensive outlook of all major stakeholders involved in the technology M&A process,” said Brenon Daly, research director at 451 Research. “There is a general consensus that deal activity will either increase over or remain at 2014 levels, with only one in 10 respondents expecting any type of drop in deal flow.”
This year’s survey had 175 participants, drawing on a broad cross-section of industry decision makers, including C-suite executives (26 percent), corporate and business development executives (22 percent), investment banking and financial advisers (31 percent), general counsel and other in-house legal professionals (12 percent) and venture capital and private equity investors (5 percent), among others.
Key findings from the latest survey by Morrison & Foerster and 451 Research include:
Respondents Divided Over Impact of Late-Stage Financing on Deal Flow
Despite confidence in the market overall, respondents were at odds on what the number of companies raising late-stage financing will mean for deal flow. According to the survey, 41 percent of respondents believe late-stage funding will slow tech M&A transactions, while 35 percent believe it will accelerate dealmaking. Respondents were more decisive in how the trend will affect the volume of IPOs, with 64 percent believing late-stage funding will temper the number of IPOs and 22 percent expecting it will accelerate IPO activity.
Corporate Executives and Bankers More Optimistic
The survey found corporate executives and bankers to be similarly optimistic with respect to tech M&A activity in 2015, with 63 percent and 61 percent expecting an increase, respectively. However, corporate executives are much more bullish about private-company valuations than bankers – 60 percent of corporate executives expect an increase in 2015 versus just 35 percent of bankers.
Bolt-Ons to Increase as Tech M&A Driver
Sixty-seven percent of respondents say filling product or service gaps through bolt-on transactions is the deal driver most likely to increase in 2015. Transactions motivated by near-term opportunities or threats posed by emerging technologies are also expected to rise according to 65 percent of respondents.
United States Remains Hot Spot for Tech M&A
The vast majority of respondents were based in the United States, with 46 percent of those surveyed based in San Francisco/Silicon Valley. When asked to pick the three “hottest” countries or regions for establishing or expanding a presence through acquisition or partnership, the U.S. was the runaway favorite (identified by 75 percent of respondents). The top five were rounded out by Western Europe (47 percent), China (33 percent), the United Kingdom (25 percent) and India (19 percent).
Respondents Rank “Identifying and Engaging Multiple Acquirers” a Valuable Service of Sell-Side Financial Advisers
When ranking the services offered by sell-side financial advisers, 82 percent of respondents said identifying and engaging multiple acquirers is among the most valuable services. Over 70 percent of respondents also identified each of the following services as having value: managing the deal process; acting as a buffer between acquirer and target; maximizing the valuation; establishing valuation or a valuation range and assisting in structuring the deal.
More information about the M&A Leaders Survey and access to previous results can be found here.