Deals by month, April through June 2010 versus 2009 (corporate and PE)
Though exactly flat with the 628 deals announced in 1Q10, announced deals in 2Q10 represent a 43% increase over the year-earlier quarter. For the second consecutive quarter, more deals were announced in each month than in any month of 2009, which topped out at 200 deals in November 2009. In addition to increasing 32% over the year-earlier period, the total deal value for 2Q10 represents a 154% sequential increase over 1Q10, which had total deal value of $12.1 billion. Total deal value for 2Q10 is only slightly lower than the third and fourth quarters of 2009, which had total value of $31.2 billion and $35.4 billion, respectively.
Source: Ernst & Young analysis of FactSet Mergerstat data, last accessed 7 July 2010.
Global top 10 deals, April through June 2010 (corporate and PE)
Several continuing megatrends shaping the technology industry are clearly visible in the top 10 deals by dollar value of 2Q10. The increasing importance of mobility is represented by the SAP-Sybase, Symantec-VeriSign and HP-Palm deals. The blurring force of cloud computing is, in part, motivating the IBM-Sterling Commerce and Symantec-VeriSign deals, both of which target software that helps to address security concerns in cloud-based commerce applications. Security is also the force behind Visa’s purchase of CyberSource and the Apax Partners-Sophos deal. Finally, technology enabling innovation in other industries is operating in the Allscripts-Eclipsys (health care) and ABB-Ventyx (smart grid) deals.
The quarter’s top 10 deals also continue a trend toward increasing concentration of deal value: they represent 54% of the value of all deals with disclosed values in 2Q10. For comparison, the top 10 deals of 1Q10 represented 49% of the value of that quarter’s deals with disclosed values, while the top 10 deals of 2009 represented just 42% of annualized dollar value.
*$1.2 billion per Hewlett-Packard’s press release (“Deal snapshot: HP CLOSES PALM ACQUISITION,” M&A Navigator, 20 July 2010, via Dow Jones Factiva, © 2010 M2 Communications). FactSet Mergerstat recognized $962 million of disclosed value for this deal. FactSet Mergerstat database methodology automatically subtracts cash acquired, net of debt, from enterprise value. Deal closed 1 July 2010.
**Completed July 2010.
Source: Ernst & Young analysis of FactSet Mergerstat data, last accessed 7 July 2010.
Global technology companies total cash, short-term and long-term investments
Sector, industry and work-life boundaries continue to blur; other industries continue to add technology to products/services to make them “smart.”
Macroeconomic uncertainty returned to the global economy during the second quarter of 2010, and may have played a role in holding flat the total number of M&A deals announced in the quarter.
At the same time, total deal values increased strongly both YOY (32%) and sequentially (154%), up from the seasonally weaker first-quarter values, powered in part by cross-border (CB) buyers.
Uncertainty, big-ticket deals return
Certain industry dynamics we’ve seen in the recent past powered the second quarter, too, and are evidenced in the quarter’s top 10 deals by disclosed dollar value.
Deals by month, April through June 2010 versus 2009 (corporate and PE)
Global top 10 deals, April through June 2010 (corporate and PE)
Sector, industry and work-life boundaries continue to blur; other industries continue to add technology to products and services to make them “smart”; and all forms of information and media are becoming increasingly mobile.
Deals involving mobility in 2Q10 were particularly diverse. We also noted certain common denominator themes running through many deals across multiple sectors, including e-commerce, cloud computing (including software as a service, or SaaS), information security and global expansion.
Top 10 deal dynamics
The top 10 deals in 2Q10 proved a microcosm for the quarter, reflecting the quarter’s cross-border strength and the industry dynamics that drove many deals.
The proposed $5.6 billion CB purchase of US-based Sybase by Germany’s SAP, the quarter’s largest deal, was motivated by Sybase’s leading position in mobile carrier infrastructure software and mobile applications support.1
Symantec’s planned $1.3 billion acquisition of VeriSign’s identity and authentication business also has a mobility component, as it brings in technologies that make it easier to provide security in cloud, social networking and mobile computingmodels.2
HP’s $962 million purchase of Palm — completed on 1 July — has a clear mobile impact, providing HP with Palm’s critically acclaimed webOS mobile operating software platform for smartphones and tablet computers.3
Cloudbased e-commerce opportunities were additional drivers in the Symantec-VeriSign deal, in IBM’s $1.4 billion planned purchase of Sterling Commerce from AT&T, and in Visa’s $1.8 billion announced deal for CyberSource.
Two other top 10 CB deals also reflected the increasing trend of technology enabling innovation in other industries. Allscripts-Misys Healthcare Solutions, a majority owned company of UK-based Misys, plans to acquire Eclipsys for $1.3 billion, with the aim of combining Allscripts’ electronic health record software for physicians and Eclipsys’ enterprise health care systems into a unified end-to-end health IT offering.4
The completed $1 billion purchase of Ventyx, of Luxembourg, by Switzerland based ABB brings “smart grid” software technology that allows a more efficient use of energy networks.5
Analysis of the top 10 deals also reveals a new trend: increasing concentration of deal value in fewer deals. In 2Q10, for example, the percentage of all disclosed values represented by the top 10 deals increased to 54% from 49% in 1Q10.
Analyzing 2009, it turns out that the top 10 deals of the year represented 42% of all annualized disclosed value. This is partly the result of growing consolidation, but also suggests renewed confidence in the technology industry’s recovery among the industry’s biggest companies.
Moreover, second quarter earnings results, which are being announced as this report goes to press, lend support to the hypothesis of renewed confidence and robust growth among technology industry leaders.
1 “SAP Buys Sybase — but Why?” The Register, 16 May 2010, via Dow Jones Factiva, © 2010 The Register.
2 “Symantec Lays Out $1.3bn to Buy VeriSign’s Security Business. Acquisition Spree Picks up Pace,” The Register, 20 May 2010, via Dow Jones Factiva, © 2010 The Register.
3 “HP Eyes webOS iPad Rival: Borgs Palm for Tablets too,” The Register, 28 April 2010, via Dow Jones Factiva, © 2010 The Register.
4 “Health-Care IT Providers to Merge in $1.3 Billion Deal,” The Wall Street Journal, 9 June 2010, via Dow Jones Factiva, © 2010 Dow Jones & Company, Inc.
5 “2nd UPDATE: ABB Buys Ventyx For More Than $1B In Cash,” Dow Jones International News, via Dow Jones Factiva, © 2010 Dow Jones & Company, Inc.
