Ongoing tech company transformations, rising private equity and cross-industry blur drove second consecutive quarterly record for big-ticket deals.
Digital transformation marches on. Tech and non-tech companies alike are being disrupted by innovative digital technologies and are turning to M&A in search of solutions. That fuelled another blockbuster quarter for global technology M&A during 3Q16. Meanwhile, private equity (PE) buyers set new quarterly volume and value records of their own. Last quarter’s new record for the most tech deals at or above $1 billion was surpassed in 3Q16, and a new quarterly record also was set for cross-border (CB) disclosed value.
Volume: At 911 deals, 3Q16 volume fell 12% sequentially and 15% year-over-year (YOY). Low 3Q16 volume caused year-to-date (YTD) 2016 to fall from 2% ahead (at the end of 2Q16) to 4% behind 2015’s post-dotcom-record pace (2,952 versus 3,064 deals).
Value: With US$155.5 billion in disclosed value, 3Q16 became the third-highest aggregate value quarter on record, pushing 2Q16 to fourth. It was up 22% sequentially and 138% YOY (over US$65.4 billion in 3Q15). The only quarters with higher values are 4Q15 (US$189.8 billion) and 1Q00 (US$228.4 billion).
Big-ticket deals: 3Q16 had 32 deals at or above US$1 billion, 4 more than 2Q16’s prior record of 28 deals. Four of those deals exceeded $5 billion, including two that crossed the megadeal line to US$14.9 billion and US$32.4 billion.
PE buyers: PE tech dealmakers drove a second consecutive record high for aggregate quarterly disclosed value: US$36.1 billion. It was 40% above 2Q16’s prior record. Likewise, PE volume set a new quarterly record of 100 deals, 1 more than the 99 deals in 3Q10.
Blur: Non-tech-buyer disclosed value soared, more than tripling YOY to US$55.2 billion — a number that eclipses 2015’s full-year total of US$53.6 billion. At US$93.2 billion YTD, non-tech buyers are 74% ahead of full-year 2015 and have a 27% share of 2016 aggregate global technology M&A value. Though non-tech-buyer volume fell 11% YOY to 135 deals in 3Q16, the YTD total of 441 deals remains 13% ahead of YTD 2015.
China: At US$14.6 billion in 3Q16 disclosed value, China’s tech dealmakers were down 55% from 2Q16’s record but remained high above their historical value and volume levels for the fourth consecutive quarter. Volume was 40 deals, down from 53 in 2Q16 but almost double 3Q15’s 21 deals.
Hidden gems: Fewer companies divested potential hidden gems in 3Q16 but disclosed value more than doubled to US$39.4 billion (from US$16.7 billion in both 1Q16 and 2Q16). Ten deals exceeded US$1 billion, including one above $5 billion. Divestiture volume was about 130 deals, down both sequentially and YOY.
Cross-border (CB) deals: At $80.8 billion, 3Q16 established a new quarterly record for CB disclosed value, rising 85% higher than the prior record ($43.6 billion set in 2Q15).
EY Legal Services Contacts:
Richard Norbruis – Global Transaction Law Leader
Richard Goold – Global Technology Law Leader