Forecasting for 2013 on M&A action within the Technology market varies depending on the source.
Some experts are predicting recovery and others are predicting more of the uncertainty seen in 2012. However, all seem to agree that there are several primary drivers behind technology M&A deals over the last few years that will continue to serve as catalysts for deals in 2013 and beyond.
In particular, a number of studies, including the latest PricewaterhouseCoopers (PwC) “US Technology M&A Insights” report, are predicting a continued focus on cloud, mobile, social, analytics and security technology.
Driving Deal Decisions: Acquire Or Recreate?
The PwC report attributes the M&A success of the technology sector last year (relative to overall M&A activity) on the acquisitions made by enterprise software companies. These companies have frequently chosen to take on start-ups who have intellectual property it would otherwise take years for the acquirers to recreate.
Traditional software companies may purchase cloud-based services, for example. They would do this to disrupt data networking and other hardware-based solutions, gaining a competitive edge.
As our world becomes increasingly technology-focused, having these cloud-based technologies may simply become a cost of doing business. It is likely we will continue to see these kinds of purchases moving forward.
It’s worth noting, however, that this type of M&A technology deal isn’t limited to tech companies. In our increasingly technological world, acquiring a tech company can offer a non-technology company entirely new revenue stream possibilities with high growth potential. These acquisitions, which span a broad variety of tech categories, allow these companies to offer specialized new services.
An increasing number of non-tech companies are realizing that and are acquiring start-ups in the tech market. As an example, consider the continued innovation in retail and consumer industries. Businesses in these fields have been a key driver behind social and local M&A technology deals. Social discovery applications and mobile payment options are catching on in a big way; that makes it likely we’ll see continued interest in this arena.
To put it simply, companies are discovering that they can either adapt to the world of cloud-based technology or they can lose out on business to those that do.
Driving Deal Decisions: The Rise of Big Data Analytics
Technology has unveiled an ever-growing ability to collect data. And companies are using that data to analyze customers in ways that can be extremely profitable.
To look at one specific use: in the retail sector stores are now beginning to drill down to data on individuals, offering them deals uniquely tailored for their specific preferences, purchase behavior, and needs. Consider the news story that made waves early last year when Target figured out a teenager was pregnant before her father did.
That requires a massive amount of data collection with sophisticated analytics to parse information, note trends and capitalize on them in a way that will drive additional sales. And big data analytics are on their way to becoming simply another cost of doing business, which makes companies who offer these services increasingly valuable targets for technology M&A deals.
Driving Deal Decisions: Additional Security Concerns
The continued mobile proliferation, increasing adoption of cloud services and social networks and the intermingling of enterprise and personal data have made consumers and businesses alike concerned about the safety of all that data.
Recent security breaches, which have affected everyone from the Sony to Coca-Cola, only raise additional red flags. Companies need to make sure they take the appropriate security measures to protect both their own intellectual property and the information they’ve collected on their customers.
They are faced with a decision: should they outsource their security, acquire a company to manage it in-house, or attempt to build a team internally to handle potential risks? This is leading to a number of acquisitions in the security technology space.
What other drivers do you feel have led to the success of the Technology M&A market?