Increasingly complex M&A in the technology sector puts the spotlight on effective due diligence to drive success
It is evident from the most casual glance at the news headlines that the European technology sector is experiencing a surge in merger and acquisition (M&A) activity levels in both the volume and value of deals.
FTI’s analysis reveals that the disclosed value of European technology sector M&A deals over the 12 month period to Q1 2014 increased 70 percent compared with the preceding 12 month period, though total deal volume increased by a more modest 7 percent.
Three technology sub-sectors in particular – electronic equipment, instruments and components; data processing and outsourcing; and online services – experienced notable increases in average disclosed deal value, up 125, 339 and 58 percent respectively versus the prior 12 months.
However, an increase in deal activity has also been paralleled by an increase in deal complexity as firms hunt for ways to create value in a crowded market.
Our analysis of the 580 European technology M&A deals that occurred during Q1 2014 (source data: S&P Capital IQ announced and executed) shows that the vast majority of technology deals (approximately 90 percent) were driven by more operationally complex motivations – such as ‘capability’ or ‘scale’ consolidation plays – rather than pure portfolio or leverage investments.