According to a report recently published by Ernst &Young (EY) entitled "Global technology M&A report: 1Q16 final look – Digital disruption, slow organic growth drive tech deals", mergers & acquisitions in the global technology industry remained strong in Q1 2016, despite macroeconomic uncertainty particularly in the equity and debt markets.

Interestingly, the deal volume in Q1 2016 (at 1002 deals) was up 8% sequentially from Q4 2015 and 2% year-over-year (YOY); meanwhile, the Q1 2016 aggregate value of disclosed-value deals (at USD$66.7 billion) was down 14% YOY and 65% sequentially. There were also 14 big-ticket deals that were over USD$1 billion in value, which included 3 deals at over USD$5 billion. Moreover, Q1 2016 saw the second-highest deal volume for private equity buyers (at 92 deals).

A few highlights of the report:

  • Analytics technologies (such as big data, up 72% YOY) led the growth of 7 of 10 disruptive deal-driving trends: Internet of things (IoT), cybersecurity, health care information technology (HIT), cloud/SaaS, connected cars , and advertising and marketing all experienced an increase in deal volume
  • Chinese buyers dominated Q1 2016 cross-border deal flow: US tech companies were once again the major targets in 2016 cross-border deal-making. China, the biggest buyer by deal value, acquired 7 US tech companies at an aggregate value of USD$7 billion, which included one USD$6 billion deal that was the largest deal by value of Q1 2016
  • Non-tech-buyer deal volume rose 26% YOY to 147 deals: deals which involved a non-tech company acquiring a tech company made up 25% of Q1 2016 total deal value, which was well above 2015's quarterly average. This trend further drives up cross-industry blur.

The report concluded that tech deals in Q1  2016 were driven mainly by accelerating digital disruption and slowing organic growth in various technology markets and geographies. Despite the fact that there were falling values for global technology M&A in Q1 2016 due to a record-setting 2015, it was nevertheless the ninth-highest-value quarter ever. Going forward, tech dealmakers will continue to seek disruptive technologies such as cloud, mobile, social and big data analytics technologies to reshape and transform the global technology industry.

The author wishes to acknowledge the contribution of Coco Chen, Summer Student, in preparing this blog post.

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