Dot com days are here again

The global M&As market is booming once more, notes Chris Gonsalves

Remember the heady days of tech deal-making at the turn of the century? Yup, those happy days are here again.

According to the merger and acquisition trackers at EY, corporate deals among tech firms have soared to heights not seen since the dot com bubble.

The aggregate value of deals inked between July and September 2014 set a new post-bubble high of $73.7bn (£46.9bn), up 41 per cent from the previous quarter and four per cent year-over-year.

With 923 deals consummated, the overall M&A volume also set a record for any quarter since 2000, rising six per cent sequentially and 31 per cent from the same quarter last year.

The M&A news comes amid increased confidence in the global economy. EY reported that 96 per cent of technology executives surveyed feel the world economy is stable or improving.

Driving the mergers and acquisitions upswing were technologies such as online and mobile payments, social networking, gaming and e-commerce, the EY researchers found. Healthcare industry upheaval in the US also drove several big-ticket deals along with many smaller deals.

Online and mobile video technologies for games, media and entertainment, business collaboration or consumer interaction, were also very active on the M&A scene.

"Global technology M&A is in motion - it is growing and setting records," said Jeff Liu, EY's global technology industry transaction advisory services leader. "And to borrow from Sir Isaac Newton, it will tend to stay in that motion unless some outside force slows it down."

Given the data and the trends, EY remains fairly optimistic that 2014 will end on a high note and that the new year will begin with healthy forward momentum for the technology sector.

Deal volume has grown for five consecutive quarters, and the running aggregate deal value of $192.7bn is already higher than in any full year after 2000. While marquee megadeals above $1bn have increased 29 per cent in the year to date, it's the smaller deals below that $1bn cap that show the most encouraging signs, the analysts said.

Smaller deals jumped 54 per cent to $63.3bn so far in 2014. That's up from $41bn for the same period in 2013.

"Technology corporate development teams stand at the intersection of rapid, disruptive innovation induced by the five technology megatrends and global economy uncertainty that has caused a sudden increase in equity markets volatility," said Liu.

"Megatrend-related innovation drove the strategic deal-making that led to several technology M&A records in [the third quarter of 2104], but prolonged volatility could slow or even stall M&A growth.

"We will keep a wary eye on volatility, but we are certain of this much: the innovation driving technology M&A growth is not slowing down," he added.