ey-q213 global technology m&a report-issue20
TRANSCRIPT
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Highlights
At $33.4 billion, aggregate value of all disclosed-value deals is essentially flat
year-over-year (YOY) and down 8% sequentially (due to one Q113 megadeal). Volume falls to 627 deals, down 14% YOY and 5% sequentially; its the lowest
level since 2010, when Q110 and Q210 both posted 628.
Private equity (PE) deal value soars 208% YOY to $13.9 billion; PE volumeincreases for the second consecutive quarter, up 10% YOY and 24% sequentially.
Corporate aggregate value falls 32% YOY to $19.5 billion, the lowest level (inother than a seasonally low first quarter) since 2008; corporate volume (570deals) hits its lowest level since 2009.
Cross-border (CB) deal volume and value continue to decline: value falls 63%YOY to $6.4 billion and volume declines 24% YOY to 195 deals.
Global technologyM&A updateAprilJune 2013
Issue 20
$40,000
$30,000
$20,000
$10,000
$0
$36,437m $33,391m$33,374m
Q113 Q213Q212
Total and average deal values for deals with disclosed value
Corporate PE
Average value (corporate and PE)
Totaldealvalue($m)
Averagedealvalue($m)
PE average deal value Corporate average deal value
$2,000
$1,500
$1,000
$500
$0
$265$202
$300
$174$249
$631
$104
$1,828
$309
Total number of all announced deals
Q113
Q213
Q212
Corporate PE
627570 57
661615 46
676 52 728
Source: EY analysis of The 451 Group
Research M&A KnowledgeBase, accessed
3 July 2013.
Note: all dollars are US$ unless otherwise
indicated.
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2
Second-quarter picture unfolds
Global technology M&A update: AprilJune 2013
A directional view of select Q213 deal-driving trends
0 4020 1208060 100
Number of deals noted
Averagedealvalue($m)
Smartmobility
Cloud/SaaS
Security
Big data
$500
$400
$300
$200
$100
$0
Socialnetworking
6% 21% 60%
$33,391m
13%
$7,053m
33 deals
$1,937m
86 deals
$19,989m
9 deals
$4,412m
6 deals
Q213
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3Global technology M&A update: April-June 2013
Given the deal-driving force of the five
transformative technology megatrends of
mobile-social-cloud, big data analytics and
accelerated technology adaptation, it might
seem surprising that global technology
M&A levels of activity arent higher. But,
there are a set of counterbalancing forces
holding down the expected levels of
activity. These include: chronic
macroeconomic and geopolitical
uncertainty, unresolved regulatory, fiscal
and tax issues and valuation gaps.
Collectively, these forces may be causing
M&A to reset to lower levels of activity
across all industries. That said, I expect the
strength of the five megatrends to prevail
in technology, resulting in slow, steady
M&A growth.
Joe Steger
Global Technology Industry
Transaction Advisory Services Leader
EY
Contents4 Rising PE, megatrends and their enablers
drive Q213 technology M&A
10 Look ahead
12 Top of mind: Technology transformations,headlines drive security consolidation
14 Regional snapshot: Americas
16 Regional snapshot: Asia-Pacific and Japan
18 Regional snapshot: Europe, Middle East
and Africa (EMEA)
21 Appendix of additional charts
22 Global technology corporate and PE
transactions scorecard by sector
23 Cross-border corporate and PE transactions
scorecard by sector
24 Global corporate and PE deals by acquiring country:cross-border and in-border
25 Cross-border deal value flow for technology deals
26 Source notes
27 Methodology
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4 Global technology M&A update: AprilJune 2013
EY has identified five long-term
megatrends that are generating
transformative innovation in
technology and leading to
technology-enabled innovation
in other industries. The five
megatrends are smart mobility,
cloud computing, social
networking, big data analytics
and accelerated technologyadaptation (technology
companies rapidly adapting to the
needs of specific industries and
other industries rapidly adapting
to the evolving possibilities that
technology enables).
Accelerated technology
adaptation challenges whether
certain companies are pure
technology companies or have
entered the industry they are
transforming. In addition, all five
megatrends are driving increased
information security requirements.
This report focuses on how these
megatrends influenced the
microcosm of global technology
M&A in Q213, as companies
competed for market share and
key technologies.
Our five megatrends
Rising PE, megatrends and their
enablers drive Q213 technology M&A
PE deal-making growth helped second-quarter global technology M&A values
improve considerably over the first quarter, returning to year-ago levels without
the benefit of the $24.4 billion Dell Inc. megadeal. Further, big-ticket deals
continued to demonstrate the strategic opportunities emerging from innovation
involving one or more of the five transformative megatrends weve followed for
several years (see sidebar at left). On the flip side:
Recent volume declines accelerated
Divestitures from corporate restructurings continued
Some companies weakened by the disruptive megatrends became deal targets
Megatrends, marketing and securitytechnologies drive big-ticket deals
On the positive side, innovation around
strategic technologies drove many top 10
deals for the quarter, especially around
mobile-social-cloud and big data analytics
technologies. Also in Q213, there was the
highest-value deal targeting advertising
and marketing technology since 2007,
and information security returned as a top
10 target for the first time since Q411.
These top 10 deal drivers were reflected
in dozens of smaller deals.
Enabling trends emerge
Among the hundreds of small and
undisclosed-value deals, we saw a few
megatrend-enabler categories emerging.
These included:
Deals targeting application programming
interfaces (APIs), technologies that ease
development of applications or integration
of data (or both), especially in cloud or
mobile environments
Several deals involved devops, acontraction of development and
operations describing a software
development method linked to lean start-
up methodology that aims to enable
greater frequency of new software
releases
A handful of deals targeted mobile
back-end as a service (MBaaS), following
MBaaS-related announcements from
cloud service providers
We explore all three megatrend enablerslater in this section, but well have to wait
and see how they evolve and if they can be
sustained over the long term.
Volume falls, remains out of syncwith NASDAQ
Deal volume declined to 627 deals, down
14% YOY and 5% sequentially from 661
deals in Q113 which was also down YOY,
by 12%. The decline is due entirely to a
decrease in corporate deal-making, which
fell 16% in Q213 (see Figure 3, page 7),
its third consecutive quarterly decline.
Meanwhile, PE deal volume increased for
the second consecutive quarter, by 10% YOY.
This also marks the second consecutive
quarter in which the long-term correlation
weve observed between the NASDAQ and
technology M&A deal volume was absent,
after diverging only once in the previous
five years. The loss of this correlation may
be perceived as partially attributable to
governmental quantitative easing programs
in the US, Europe, Japan and elsewhere,
which have buoyed equities markets but
not technology companies deal-making
confidence.
The main concern about declining M&A
volume at a time of so much technologyinnovation is that it suggests that buyers
and sellers remain apart on company
valuations. In fact, EY believes high
valuations (which drive down returns),
along with macroeconomic and geopolitical
uncertainty, are contributing to falling
volume in US deal-making for all industries,
leading to a possible fundamental reset of
the size of the M&A marketplace.1 Other
factors contributing to the volume reset
include slow global growth and unresolved
regulatory, fiscal and tax issues.
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5Global technology M&A update: AprilJune 2013
Figure 1: Global top 10 deals, April-June 2013 (corporate and PE)
Buyer Disclosedvalue ($m)
Deal typeMultiple
of EV/TTM
revenue
Multiple
of EV/TTM
EBITDA
Premiumoffered
Announced Status
Bain Capital/Golden Gate/GIC/Insight Venture Partners to
acquire BMC Software, Inc.
Fidelity National Financial, Inc. to acquire Lender Processing
Services, Inc.
Salesforce.com, Inc. acquired ExactTarget
IBM Corporation acquired SoftLayer Technologies, Inc.
Tsinghua Holdings Co. Ltd. to acquire Spreadtrum
Communications, Inc.
Yahoo! Inc. acquired Tumblr
Google Inc. acquired Waze Ltd
Thomas H. Lee Partners L.P. to acquire CompuCom
Systems, Inc.SAP AG acquired hybris AG
Vista Equity Partners acquired Websense, Inc.
$6,900 6 May Pending PE 3.2x 10.0x 3%
$2,900 28 May Pending Corporate 2.0x 11.5x 21%
$2,500 4 Jun Completed* Corporate 7.6x N/A 58%
$2,000 4 Jun Completed* Corporate N/A N/A N/A
$1,389 21 Jun Pending PE 1.8x N/A N/A
$1,100 20 May Completed Corporate N/A N/A N/A
$1,100 11 Jun Completed Corporate N/A N/A N/A
$1,100 8 Apr Pending PE 0.5x N/A N/A
$1,000 5 Jun Completed** Corporate N/A N/A N/A
$903 20 May Completed PE 2.5x 16.3x 70%
Aggregate value flat, average value up YOY
In terms of the values that were disclosed
in Q213, aggregate value essentially was
flat YOY, rounding to $33.4 billion in both
periods. At $249 million, average value
increased 18% YOY. But the better news
comes when we exclude one transaction
the $24.4 billion (still pending shareholder
approval) megadeal to take Dell private
from Q113 to better reflect that quarters
actual M&A landscape. Then the sequential
declines in the official charts change to
growth of 177% in aggregate value and
142% for average value.
Cross-border activity falls faster
than in-border
The added complexity and risk inherent inCB deals became apparent in the Q213
numbers. CB deal volume declined faster
than in-border (IB) deals in the quarter,
after falling at the same rate for the
previous three quarters (see Figure 13,
page 23). At 195 deals, Q213 CB deal
volume was down 24% YOY and 10%
sequentially, compared with 14% and 5%,
respectively, for all deals. And although
CB average value jumped 120% sequentially
to $143 million per deal, it did not reverse
the 18-month-long trend of its declining
average value relative to the all-deal average
value. CB average value was higher than
all-deals before Q312; since then, it has
been lower and the gap has widened each
quarter. In Q213, CB average value was
43% lower than all-deal average value.
PE skyrocketing
Though only half the size of last quarters
Dell deal, PE aggregate value of $13.9 billionwas higher in Q213 than in any previous
quarter (excluding Q113) since we began
these reports in 2008. PE average value of
$631 million in Q213 was topped only
Cloud/SaaS was so pervasive in Q213 that even deals not involving much cloud revenue were somehow ascribed to the cloud. Taking private BMCSoftware was motivated, in part, to enable BMC to move more aggressively toward cloud applications2 similar to the Dell announcement in Q113.3
Other top 10 deals focused directly on or touching on the cloud were Salesforce.com-ExactTarget, IBM-Softlayer, Google-Waze, Thomas H.Lee-CompuCom, Yahoo-Tumblr and SAP-hybris.
Top 10 deals with smart mobility aspects included: Tsinghua-Spreadtrum, Google-Waze, Thomas H. Lee-CompuCom and SAP-hybris. Social networktechnologies were part of the Google-Waze, Yahoo-Tumblr and Salesforce.com-ExactTarget deals. These companies use social and cloud technologiestogether to improve the effectiveness of email marketing (ExactTarget), content creation and discovery (Tumblr) and driving through traffic (Waze).
Rounding out the top 10 are Vista-Websense (a security software provider) and non-technology company Fidelity National Finances deal for LenderProcessing Services, a loan processing technology services provider that was part of Fidelity prior to 2006.
PE buyers purchased 49% of the total value of top 10 deals ($20.9 billion). A non-technology buyer (Fidelity) acquired another 14%.
*Completed July 2013; **Completed August 2013.
Note: announced deal values are often subject to change at the time of close, due to subsequent revisions to the terms of the deal.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
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6
The top 25 global technology companies* had a rare sequential decline in cash reserves during Q213. Their aggregate stockpile of cash and short- andlong-term investments fell 1% sequentially to $754 billion, from $765 billion in Q113. But the Q213 value rose 12% YOY from $673 billion in Q212. Thedecline came primarily from the next 15 companies, which fell 9% sequentially, while the top 10 rose 3%. Looking deeper, individual companies declinesappeared to be related to dividend payments (the second quarter is the traditional dividend payout season in Europe, for example), share buybacks andacquisitions. In fact, one company showed a steep decline from spending on a deal this year compared with the prior-year period, in which it had proceedsfrom selling a business unit. We still expect long-term growth in this metric.
*Top 25 companies identified are based on average ranking of market value and sales as of 31 December 2012.
Note: numbers in above chart differ from past published reports due to changes in the composition of the top 25 companies for 2013 and the date Capital IQ database was
accessed for this chart.
Source: EY analysis of Capital IQ data, accessed 29 July 2013.
Global technology M&A update: AprilJune 2013
$264
$396
$278
$368
$257
$349
$277
$332
$609b $606b
$646b $660b
$268
$405
$673b
$273
$421
$694b
8%
5%
2%
2%
2%
2%
4%
2%
3%
10%
0%
6%
5%
8%
7%
5%
7%
0%
Q211 Q311 Q411 Q112 Q212 Q312
4%
3%
4%
$274
$463
$737b
Q412 Q113
$283
$482
765b
Next 15
Top 10
Q213
$257
$497
$754b
3%
9%
1%
Figure 2: Aggregate cash, short- and long-term investments for the top 25 technology companies, Q211Q213 ($b)
once in the last five years ($726 million in
Q112). PEs strength appears to come from
a combination of factors: some technology
targets have been weakened by not keeping
up with innovation from the five
megatrends, enabling activist shareholders
to take positions in their stock; favorable
credit availability at low interest rates; and
the pursuit of value-creation opportunities
through operational improvements that
corporate buyers may not see or may
ignore in favor of deals that focus more
on strategic technology opportunities. PE
deal-making was most prevalent in the
software/SaaS, internet and IT services
sectors in Q213. PE volume also increased
YOY in those sectors, as well as in the CPE
sector (see Figure 12, page 22).
PE buyers acquired 42% of Q213 aggregate
value, which would have been unprecedented
except for the 70% share PE took in Q113
due to the Dell deal. For comparison, PEs
share of full-year 2012 aggregate value was
only 16%; it was 20% in 2011. In addition,
non-technology buyers acquired 12% of
Q213 aggregate value. So together, PE and
non-technology buyers acquired 54% of the
quarters disclosed value. There was just
one Q213 disclosed-value deal in which a
technology company purchased a non-
technology unit: Googles purchase for $1
(thats right, one US dollar) of the city of
Provo, Utahs fiber-optic network. PE buyers,
meanwhile, did 4 of the top 10 deals and a
non-technology buyer did a fifth.
In fact, the largest deal of Q213 was a
cloud-related PE opportunity: the $6.9 billion
Bain-led deal to take BMC Software private
(see Figure 1, page 5). The software
company had just $100 million in cloud
revenue for its fiscal year ended March 2013
and like Dell said privatization will allow
the company to move more aggressively
toward cloud applications and mobile devices.4
Of note, as enterprise technology customers
appear more ready to adopt cloud computing
than vendors are to offer it, some companies
Microsoft Corporation and Cisco Systems,
Inc., among them have begun lobbying
their reseller partners to move more
aggressively to the cloud.5,6
PE buyers acquired
42%of Q213 aggregatevalue.
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7Global technology M&A update: AprilJune 2013
Deals announced Q212 Sequential % changeQ213
676 570 7% 16%
143 112 8% 22%
$28,868 $19,498 80% 32%
$202 $174 67% 14%
Q2 Q3 Q4 Q1 Q2
52 57 24% 10%
15 22 57% 47% $4,506 $13,893 46% 208%
$300 $631 65% 110%
Corporate and PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
728 627 5% 14%
158 134 14% 15%
$33,374 $33,391 8% 0%
$211 $249 19% 18%
PE
Number of deals announced
Number of deals with disclosed valuesTotal value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
Corporate
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
YOY % change
Figure 3: Global technology transactions scorecard, Q213
Aggregate value for PE deals
soars 208% YOY to
$13.9 billion.
In a different kind of PE cloud/SaaS
deal, Thomas H. Lee Partners acquired
CompuCom for $1.1 billion. CompuCom was
a traditional value-added reseller (VAR)
that transformed itself into a Cloud Builder
(a VAR that helps enterprises get the most
out of their cloud services) and was named
a cloud computing superstar earlier this
year by trade publication CRN.7 Exemplifying
a corporate cloud/SaaS deal aimed at
strategic growth, IBM spent $2 billion
buying SoftLayer Technologies, a cloud
infrastructure services provider, in order to
accelerate its own cloud-related revenue
growth (see Americas snapshot, page 14).
Social, marketing technology
as a serviceThree more top 10 deal targets ExactTarget,
Tumblr and Waze all deliver their
applications and services via the cloud.
Salesforce.coms completed $2.5 billion
acquisition of email marketing services
provider ExactTarget (see Americas
snapshot, page 14) is the largest deal for a
marketing technology company since 2007,
when Google announced its $3.1 billion
acquisition of DoubleClick, Inc.8 Established
technology companies including IBM, Oracle
Corporation, Salesforce.com and SAP have
been acquiring marketing or e-commerce
technology companies, often cloud-based
and involving social media analytics,
customer analytics or both. They appear
to be following the money: some research
forecasts that chief marketing officers will
spend more on technology than chief
information officers by 2017.9 In Q213,
there were more than four dozen deals
targeting advertising and marketing
technology; their disclosed value (including
the ExactTarget deal) was nearly $4 billion.
Tumblr and Waze involve social networking.
Waze provides a GPS-based mobile applicationthat taps into a community of users to
enhance the accuracy of maps and provide
real-time updates about current conditions.
The US Federal Trade Commission (FTC) is
reviewing the $1.1 billion deal after it closed
(in June).10 Yahoos $1.1 billion deal for
Tumblr, a blog creation and hosting service,
brings it a young audience and the rapt
attention of fast-growing communities of
Scorecard attributes were precisely mixed in Q213 12 green arrows pointing up and 12 red arrows pointing down. The dual stories of the quarter werethe significant increase in PE activity and corporates decline, especially YOY. Not counting Q113 and the Dell megadeal, the $13.9 billion PE quarterlyaggregate value seen above is the largest in the five years we have collected this data.*
Corporate deal-making activity, however, has rarely been lower than seen above. Corporate quarterly aggregate value has not been below $19.5 billion inother than a first quarter (which typically has the lowest technology M&A activity of the year) in nearly five years, since Q308.* And corporate M&Avolume has not dipped lower than 570 deals since Q409.*
*Though based on two different data sources, we believe these comparisons are useful from a directional perspective. For a full explanation of our methodology, see page 27.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
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PE and non-technology buyers
together accounted for
54%of Q213 aggregate
value.
8 Global technology M&A update: AprilJune 2013
PE and non-technology buyers together accounted for 54% of Q213 quarterly aggregate value, squeezing every other sector but one into net sellerpositions. PE buyers accounted for 47% of the CE value sold, 42% of the IT services value sold, 59% of the semiconductors value sold, 46% of thesoftware/SaaS value sold and negligible percentages (if any) of the remaining sectors. From the perspective of PE spending, though, 70% ($9.7 billion)was concentrated in software/SaaS. Similarly, non-technology buyers concentrated 90% of their deal value in software/SaaS, almost all of which (97%,or $3.7 billion) came in two deals: Fidelity Nationals $2.9 billion announced deal for Lender Processing Services and The NASDAQ OMX Group, Inc.s$750 million deal for BGC Partners eSpeed platform, which offers online and mobile electronic trading software.
The internet sector was the only other net buyer. Buyers are split spending 50-50 between their home sector and software/SaaS, mostly on the
strength of two deals each. Targeting internet companies were Yahoos $1.1 billion deal for Tumblr and Baidu Inc.s $400 million announced acquisitionof the online video business of PPStream Inc. Targeting software/SaaS were Googles $1.1 billion deal for Waze and real-estate website Trulia Inc.s$355 million announced acquisition of Market Leader Inc., which provides real-estate lead generation technology.
Note: percentages may not total 100 due to rounding.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
Figure 4: Global technology transactions value flow by sector, Q213
users.11 Yahoo said Tumblr will continue
operating independently. Of note, Yahoo
was the most acquisitive company in our
Q213 M&A data, with eight deals (including
Tumblr). One was a free conference call
services provider and the other six involved
various kinds of mobile apps, including
travel comparison, photo editing, location-
aware videogames and research surveys.
None of them had a disclosed value.
E-commerce analytics and smart mobility
SAP completed its $1 billion deal for hybris,
a business-to-business (B2B) e-commerce
platform with analytics capability offered as
SaaS or on-premise software (see the
Europe, Middle East and Africa snapshot,
page 18). The hybris deal includes a mobileelement, and Waze, obviously, has a strong
smart mobility aspect, as do hundreds of
Q213 deals. But only 1 top 10 deal was
entirely focused on mobility: Chinese state-
owned Tsinghua Holdings $1.4 billion deal
for Spreadtrum Communications, a maker
of mobile-phone chips (see the Asia-Pacific
and Japan snapshot, page 16).
Security deals increase
Similarly, we saw a jump in information
security deals in Q213, with one making it
into the top 10 deals of the quarter: Vista
Equity Partners $903 million deal for
Websense, whose data leakage prevention
software filters web content and can block
access to websites. The current trend is to
integrate such capabilities into unified
security software that addresses multiple
threats to enterprise networks12 (see Top
of mind, page 12). The second-largest
disclosed-value deal was Intel Corporation
unit McAfees $389 million deal for Stonesoft,
a Finnish provider of next-generation firewalls
and intrusion detection and prevention
capabilities. Given the increasing security
threats from the moves to mobile devices(including the bring-your-own-device trend)
and the cloud, we noted nearly four dozen
security deals in Q213, or roughly 7% of
all deals, up from 3% in Q113 and 5% in
full-year 2012.
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Dealvalue($m)
$13,893
$1,314
$2,966
$5,520
$4,189
$3,431
$1,240$838 CE 3%
CPE 4%
Internet 10%
IT services 9%
Semiconductors 4%
Software/SaaS 17%
Non-tech 12%
PE 42%
$33,391m
Buyer
$5,339
$2,392
$21,320
$1,726
$1,071$1,543
CE 3%CPE 5%
Internet 5%
IT services 16%
Semiconductors 7%
Software/SaaS 64%
$33,391m
Target
CE = Communications equipment
CPE = Computers, peripherals and electronics
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Notable divestitures
We noticed more corporate divestitures by technology companies in Q213 thanQ113, more than three dozen in all. There were deals motivated by corporate
restructurings to enable better focus on core competencies, such as two by
VMWare, Inc. (one for $30 million and one with no disclosed value). There were
also many deals that involved trends mentioned in this report and, therefore,
might represent more opportunistic attempts to capitalize on the value of non-core
assets. For example, Integrated Device Technology Inc. sold its enterprise flash
controller business to PMC-Sierra Inc. for $100 million, and Alcatel-Lucent, S.A.,
sold its ProgrammableWeb unit, which offers a searchable directory of APIs, to
start-up Mulesoft for no disclosed value. Similarly, Microsoft sold its Mediaroom
IPTV service delivery technology for network operators to Ericsson, and Samsung
sold its Liquavista electrowetting display technology, acquired in Q111, toAmazon.com, Inc.
9Global technology M&A update: AprilJune 2013
Cross-border disclosed deal value
falls 63% YOY to
$6.4 billion.
APIs, MBaaS and devops
In Q213, deals involving APIs, MBaaS and
devops were small or had undisclosed values.
But their strategic nature is apparent by the
names of some buyers. And our data
provider, The 451 Group, reports that Q213
API activity could signal the opening round
for an API land grab by all IT vendors that
rely on integration to add value to their
respective offerings.13 Intel Corporation
acquired two API-related software/SaaS
companies in Q213, Mashery, Inc.
($180 million) and Aepona Ltd.
($120 million). CA Technologies Inc.
acquired API management software
company Layer 7 (no disclosed value).
MBaaS, meanwhile, provides developerswith mobile application development and
hosting capability as a service and is
typically accessed through APIs. Two very
different kinds of companies that provide
cloud-based services, Rackspace, Inc.
and Salesforce.com, announced MBaaS
offerings during Q213.14 Exemplifying the
handful of MBaaS-related deals in Q213 was
Facebook, Inc.s agreement to acquire Parse
for $85 million. The deal should enhance
Facebooks mobile commerce efforts by
providing the capability to offer an end-to-
end mobility platform that can integrate
third-party services and APIs, as well as go
that extra mile in helping developers build
mobile apps, according to The 451 Group.15
Exemplifying the devops trend, which
accelerates new software releases by
enhancing collaboration between an IT
departments developers and operations,
were undisclosed-value acquisitions by IBM,
Microsoft and CA Technologies.
Flash storage, 3D printing and small cells
Deal volume in computers, peripherals and
electronics (CPE) and communications
equipment (CE) was small, but interesting.
The top CPE deal by dollar-value was a
$403 million announced plan by Stratasys Ltd.,
a leading maker of industrial-level 3D
printers, to acquire Makerbot Industries LLC,
which has pioneered lower-cost 3D printers
(from $2,000 to $2,800 for one model).16
Also among CPEs top five deals were two inwhich the targets provide flash technology
for data center performance acceleration,
one by Western Digital Corporation
($340 million) and the other by Fusion-io,
Inc. ($119 million). In CE, the top deal
exemplified several we saw involving small-
cell technology: Ciscos acquisition of
Ubiquisys Ltd., a maker of small-cell radio
transmitters that improve mobile service by
sending and receiving data within a smaller
area than outdoor towers. Theyre used to
improve coverage in crowded areas such
as stadiums and rail stations, as well as
in homes.
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10
The strong overall deal value
driven primarily by PE buyers
was encouraging in the secondquarter. I expect conditions such
as low interest rates, lack of
confidence among corporate
buyers, the need for some
technology companies to
improve shareholder returns and
PE firms dry powder to foster
ongoing PE deal strength.
Joe StegerGlobal Technology Industry
Transaction Advisory Services Leader
EY
We were half right and encouraged, even,
by the strength of big-ticket deals that
drove Q213 aggregate value high enough
to match last years second quarter. This
level is about as high as weve seen in the
last five years, aside from the second and
third quarters of 2011 (which each had
several megadeals).
But we were surprised by the 5% sequential
decline in global technology transaction
volume to a level that hasnt been lower
since 2009, especially in light of the five
technology megatrends that are driving
demand for related technologies and talent
to help companies compete more effectively.
That decline, along with the secondconsecutive quarterly failure of deal volume
trends to align with NASDAQ growth,
suggests to us that corporate technology
buyers may remain on the sidelines until
confidence and valuations improve.
Apparently, the quantitative easing that
some suggest is helping to drive increases
in the NASDAQ and seller expectations
around value cannot overcome corporate
buyers low confidence, which explains the
current and uncommon divergence between
the NASDAQ and technology M&A. The low
corporate buyer confidence that is
thwarting technology deal-making stems
from a number of factors, including:
ongoing macroeconomic and geopolitical
uncertainty, unresolved regulatory, fiscal
and tax issues and valuation gaps.
On a positive note, low interest rates, lack of
confidence among corporate buyers and the
dry powder PE firms are believed to have
on hand suggest ongoing PE technology
deal-making strength.
Given that PE strength, and our belief that
Q213 volume was too low to sustain, were
going to predict gradual growth in volume
and value for the rest of 2013 again. Ifwere right, technology may be running
counter to the overall M&A trend for all
industries, which we believe may be
undergoing a fundamental reset to a lower
level of long-term activity. We believe that
continuous innovation around the five
megatrends of smart mobility, cloud
computing, social networking, big data
analytics and accelerated technology
adaptation (see sidebar, page 4) is
happening too fast for corporate buyers
to sit still for too long.
Global technology M&A update: AprilJune 2013
Look ahead
In our Q113 report, we predicted gradual growth in technology deal M&A
volume and value on the strength of our April 2013 Technology Capital
Confidence Barometer(CCB) survey, which showed a significant increase
in confidence among technology executives.
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11Global technology M&A update: AprilJune 2013
Consider the following questions and how the answers may impact deal-making
over the next few quarters:
Will volume go up, down or stay flat?
And will it realign with the NASDAQ?
When will macroeconomic conditions
and their impact on buyer confidence and
valuations improve enough to reduce
the risk of doing really big, transformative
deals?
Will cloud/SaaS deal-making continue to
accelerate?
To what extent will we see more deals to
take private those technology companies
weakened by the cloud/SaaS model and
the other megatrends?
Will APIs, MBaaS and devops continue tobe major deal drivers?
Are we at the beginning of a long-term
increase in information security deals,
given technology trends and growing
public concern? Or, is the Q213 increase
an aberration?
Will non-technology companies, which
acquired 12% of aggregate value in Q213
compared with only 1% in Q113, continue
to be a significant presence, as they
continue to adapt to the technology
megatrends or become disrupted by them?
In the absence of an improvement in
global macroeconomic conditions, will CB
volume and value continue to decline?
Will advertising and marketing technology
continue to be a major deal target?
To what extent will activist shareholder
involvement remain a factor in driving
companies with depressed valuations toput themselves up for sale or divest
underperforming business units?
IPO activity appears to be increasing;
will this drive up valuation expectations
for technology M&A?
For many technology
segments, revenue from
traditional products is
falling faster than mobile-
social-cloud and big data
analytics are growing. To
reverse that trend, manycompanies will continue to
look to M&A strategically
as a way to catch up.
Joe Steger
Global Technology Industry
Transaction Advisory Services Leader
EY
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12 Global technology M&A update: AprilJune 2013
Top of mind
Technology transformations, headlinesdrive security consolidation
Jeff Liu
Senior Managing Director
and Leader US Technology
M&A Advisory
Ernst & Young Capital
Advisors LLC*
Tel: +1 408 947 5588
E-mail:[email protected]
This Top of mind article is even more top-of-mind than most, because many of
the trends behind it are seen nearly every day in headline news. Stories about
information security breaches and cyber espionage not only reflect the changes
being caused by transformations resulting from the five technology megatrends
(see sidebar, page 4), but also are a driver of enterprise security buyer behavior.
Consequently, information security market growth is more than 50% higher than
IT spending growth overall, and there has been a spike in consolidation among
information security vendors.
For further information, contact:
Mobile-social-cloud transforms security
As Figure 5 shows, increasing use of cloud
computing and mobile devices has
transformed enterprise IT environments in
ways that are significantly changing the
information security landscape. The entirely
closed and private enterprise network
has become an historical artifact. Replacing
it are borderless networks in which
confidential information, including
intellectual property (IP), is routinely
stored outside the perimeter of the
corporate network and transmitted to
mobile devices via open airwaves.
Exacerbating the issue is that the relatively
new capabilities described above are
empowering new behaviors, including
increased levels of inter-company collaboration
as an enabler of innovation across nearly
all industries.1 That collaboration means
corporate employees are sharing more
information than ever before across
company borders with partners in their
value networks.
In addition, the rise of bring your own
device (BYOD) and of social networking
(which encourages expanded participation
in, and reduced control over, corporate
communications) extend corporations
information borders even further.
New security challenges emerge
These technology-induced changes result in
corporate IT environments that are far more
powerful and far more difficult to secure.
And the same changes that are empowering
corporate innovation are challenging
corporate security. As it becomes easier for
employees to access information anywhere,
on any device and at any time, it becomes
easier for somebody to fraudulently access
that data, says Vishal Tayal, Senior Vice
President, US Technology Lead Advisory,
M&A, Ernst & Young Capital Advisors LLC.
At the same time, the nature of security
threats is evolving, in part because the
changes described above lead to additional
opportunities for exploitation. Not too many
years ago, the main threats were employees
unintentionally giving away information or a
password, or a hacker trying to gain attention.
Today, attacks have become more complex
and comprehensive, and are motivated by
political activism, or are for profit, says Jim
Reinhart, Managing Director, US TechnologyLead Advisory, M&A, Ernst & Young Capital
Advisors LLC. The rising numbers of security
breaches making headlines in the last year
or two are testament to all these changes.
For security vendors, an immediate benefit
is that the security products market will
grow at a compound annual growth rate
(CAGR) of 7.7% from 2012 to 2016,
accelerating from a 6.9% CAGR during the
previous four years.2 That compares with
overall IT spending growth of just 4.9% in2013.3
Jim Reinhart
Managing Director
US Technology Lead
Advisory, M&A
Ernst & Young Capital
Advisors LLC
Tel: +1 415 894 4205
E-mail:[email protected]
Vishal Tayal
Senior Vice President
US Technology Lead
Advisory, M&A
Ernst & Young Capital
Advisors LLC
Tel: +1 415 894 8767
E-mail: [email protected]
Fundamental changes to the
technology stack caused by the
five megatrends social-mobile-
cloud, big data and acceleratedtechnology adaptation are
adding new dimensions to
enterprise security. As their
networks become more
permeable, and protecting all
types of content becomes the
biggest challenge, companies
are focusing on securing the
data itself.
Jeff Liu
*Ernst & Young Capital Advisors LLC is a
broker-dealer registered with FINRA and an
affiliate of Ernst & Young LLP in the US.
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13Global technology M&A update: AprilJune 2013
Source: EY analysis, 2013.
Cloud/virtualization Redefines systems, file/storage,
security and endpoint Reorients business and sales models
Redistributes total cost of ownershipand vendor choke points
Mobility Revolutionizes communication
and collaboration (e.g., enterprisesocial media)
Creates new security and managementopportunities
Magnifies data and storage requirements
Borderless Increases threat vectors and magnifies
potential impact Requires holistic IT management
policies Favors integrated vendors or
solutions providers (i.e., VARs, XaaS)
Endpoints
Closed perimeter
Enterprises seek end-to-end
security solutions
Another impact for security vendors is that
corporate customers are reacting to the
greater complexity of modern information
security challenges by seeking single-source,
end-to-end solutions providers that can hide
the complexity and take on responsibility for
the overall solution. That, in turn, is driving
consolidation among providers of different
types of security solutions, as they seek to
achieve the product breadth and scale that
customers seek.
The main types of security solutions that
customers seek to integrate are:4
1. Endpoint security: secures the endpointof a corporate network from attacks and
information leakage
2. Network security: protects corporate
networks from disruption by external
threats
3. Identity and access management (IAM):
identifies users and controls access to
information within a system
4. Security and vulnerability management
(SVM): enables organizations to
determine, interpret and improve
risk posture
5. Messaging security: protects email,
instant messaging and other
collaboration applications
6. Web security: protects against web
inbound (malware) and outbound
(leakage) threats
7. Other: emerging security functions
Q213 M&A sees related security
transaction spike
In Q213, we noticed a spike in security-
related transactions that exemplified the
drivers described above. For example, an
information security deal (Vista Equity
Partners-Websense, $903 million) made it
into the top 10 deals of the quarter (see
Figure 1, page 5) for the first time since
Q411, when a group led by Thoma Bravo
LLC took Blue Coat Systems, Inc., private.
The Websense deal had the highest premium
of any top 10 deal for which a premium was
available. Also of note, since going private,
Blue Coat has added to its security offering
via M&A; in Q213, it acquired Solera
Networks, Inc., a network forensics and
security analytics company and SSLappliance assets of Netronome Systems,
Inc., for network inspection, both for
undisclosed values.
The second-largest Q213 security deal saw
Intels McAfee unit add next-generation
firewalls and intrusion detection and
prevention capabilities via a $389 million
deal for Finland-based Stonesoft. Also in
Europe, Cassidian, a division of European
Aeronautic Defense and Space Company
N.V. (EADS), acquired unified threat
management systems and software provider
Arkoon Network Security, of France, for
$19 million. Cassidian is a worldwide leader
in global security solutions and systems.
Arkoon provides anti-malware, anti-virus,
endpoint, firewall, intrusion prevention
and data leakage prevention capabilities.
In all, we noted nearly four dozen security
deals in Q213, or roughly 7% of all deals,
up from 3% (less than two dozen) in Q113
and 5% in full-year 2012. Several involved
multiple acquisitions of point solutions by
one company.
Start strategy development early
Because of the fast-changing dynamics
of the security landscape, every security
vendor no matter how broad or narrow its
product line should already be thinking
about how to manage its organic product
development and transaction strategy to
match the pace of rapid change.
Questions to consider Are your security offerings
comprehensive i.e., do they cover
all seven types mentioned above?
Are your security offerings easily
integrated i.e., will they seamlessly
plug into most companies existing
IT infrastructure?
What are you doing to plan for the
incorporation of rapidly evolving
up-and-coming security requirements
(e.g., mobile device and application
management)?
Figure 5: Traditional enterprise environment and transformational themes
Data center
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14 Global technology M&A update: AprilJune 2013
Regional snapshot: Americas
PE drives YOY value increase again
Americas aggregate value increased YOY in Q213 but volume
continued to decline at an even faster rate than the global average.
Companies innovating in cloud/SaaS, smart mobility, social networking,
and advertising and marketing technology continued to be major
deal targets.
Aggregate value rose 18% YOY to
$27.7 billion, while global aggregate value
was flat. Consequently, Americas share
of global aggregate value climbed to 83%,
compared with 78% for full-year 2012. Itdeclined 8% sequentially, however, due to
skew from the Dell deal in Q113. As in
Q113, the increase in Americas value was
entirely due to PE deals: PE aggregate value
leapt 237% YOY to $11.5 billion in Q213,
outweighing the 19% decrease in corporate
aggregate value to $16.2 billion.
Americas volume declined 19% YOY and
7% sequentially to 432 deals, compared
with global decreases of 14% YOY and 5%
sequentially. Americas volume was 74% of
global volume for full-year 2012 but has
declined to 71% in Q113 and 69% in Q213.
Again, the volume picture would have been
worse if not for PE volume growth, which
partially offset corporate volume declines
(see Figure 7, page 15).
The largest deal by dollar-value, both in the
Americas and globally, was the Bain-led deal
to take BMC Software private (see Figure 6,
page 15). Like Dell before it, BMC says it
needs to move more aggressively to the
cloud and believes that going private willenable it to do so.1
The other four of the top five Americas
deals were corporate transactions. Fidelity
National Financial agreed to pay $2.9 billion
for Lender Processing Services, a provider
of loan processing technologies with which
Fidelity is very familiar. In 2008, the target
spun out of Fidelity National Information
Services, Inc., which itself spun out of
Fidelity National Financial in 2006.2 The
acquisition restores the presence of FidelityNational Financial in technology services for
title insurance and mortgage servicing.
Salesforce.coms completed $2.5 billion
acquisition of ExactTarget highlighted the
continuing trend of enterprise software/SaaS
companies acquiring online and mobile
advertising and marketing technologies.ExactTarget provides primarily email, but
also social network and other digital
marketing services. The last such deal to
make it into the quarterly top 10 was Oracle
Corporations Q412 acquisition of Eloqua, Inc.,
for $956 million. We saw more than four
dozen such deals in Q213 (all much smaller
or with undisclosed values), roughly two-
thirds of which involved Americas buyers.
Behind this trend are increasing technology
budgets overseen by marketing executives
especially for cloud-based technologies.3
Accelerating cloud revenue growth was
the driver for IBMs $2 billion deal for
cloud infrastructure provider SoftLayer
Technologies. IBM plans to create a new
cloud services division that combines
SoftLayer with existing IBM cloud technology
to create a cloud platform that IBM will
market globally to enterprises and smaller
customers.4 Completing the top five
was Yahoos $1.1 billion deal to acquire
blogging-services site Tumblr.
Overall, Americas buyers accounted for
73% of global cloud/SaaS deal volume and
84% of disclosed value. In smart mobility,
Americas companies acquired 79% of global
deal volume and 98% of disclosed value;
in big data analytics, 73% of volume and
roughly half the disclosed value. Although
there were fewer health care IT deals in
Q213 than in recent quarters, there were
still roughly two dozen (with undisclosed
values), nearly 90% of which involved
Americas buyers.
Advertising and marketing are
becoming more effective
without being more bothersometo consumers by harnessing
the power of mobile-social-cloud
and big data analytics
technologies. Thats why M&A
activity around technologies that
enable them will continue
to increase.
Joe Steger
Global Technology Industry
Transaction Advisory Services LeaderEY
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Figure 6: Top five Americas deals, Q213 (corporate and PE)
Buyer Disclosed Announced Deal type Premium
value ($m) offered
Bain Capital/Golden Gate/GIC/Insight Venture Partners to acquire BMC Software, Inc. $6,900 6 May PE 3%
Fidelity National Financial, Inc. to acquire Lender Processing Services, Inc. $2,900 28 May Corporate 21%
Salesforce.com, Inc. acquired ExactTarget $2,500 4 Jun Corporate 58%
IBM Corporation acquired SoftLayer Technologies, Inc. $2,000 4 Jun Corporate N/A
Yahoo! Inc. acquired Tumblr $1,100 20 May Corporate N/A
Deals announced Q212 Sequential % changeQ213
Figure 7: Americas transactions scorecard, Q213
494 390 9% 21%
98 71 11% 28%
$19,951 $16,152 76% 19%
$204 $227 58% 11%
Q2 Q3 Q4 Q1 Q2
38 42 5% 11%
12 18 80% 50%
$3,420 $11,533 55% 237%
$285 $641 75% 125%
Corporate and PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
532 432 7% 19%
110 89 20% 19%
$23,372 $27,685 20% 18%
$212 $311 33% 47%
PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
Corporate
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
YOY % change
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
Americas aggregatePE deal value
increased
237%YOY in Q213.
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Asia-Pacific and Japan
companies positioned
themselves in Q213 for further
growth by focusing on the smart
mobility megatrend, and by
acquiring valuable business
assets internationally.
Ben Kwan
Transaction Advisory Services Leader
Asia-Pacific
EY
16
APJ aggregate value climbed 31% YOY to
$3.3 billion, compared with an 18% YOY
rise in the Americas and a 68% decrease inEMEA. The APJ growth represented a 592%
sequential increase from the relatively low
Q113 aggregate value of $483 million.
Notably, four PE deals (three with disclosed
values), including two of the top five
transactions, contributed $2.3 billion (69%)
to Q213 aggregate value. APJ typically has
zero, one or two PE deals. The last time APJ
posted more PE disclosed value was in Q311,
when Innovation Network Corporation of
Japan acquired and combined the mobile
display units of Hitachi, Ltd., Sony Corporation
and Toshiba Corporation in a $2.6 billion deal.
In the previous quarter, the largest APJ deal
was just $220 million and no other transaction
exceeded $100 million in disclosed value;
in Q213, the largest deal was $1.4 billion
and there were six deals of $100 million
or more, together contributing $3.1 billion
(93%) of the aggregate value seen in
Figure 9 (page 17). APJ Q213 volume of
48 deals represented a decline of 16% YOY
and 8% sequentially, slightly more than the
global decreases of 14% and 5%, respectively.
Deals related to smart mobility included the
$1.4 billion agreement by government-
owned Tsinghua Holdings of China to acquire
Spreadtrum Communications, which develops
chipsets used in mobile phones and other
devices. The deal is the largest global
semiconductor acquisition of 2013,
so far. Tsinghuas portfolio companies
make a variety of consumer and business
technology products. One of those
companies was responsible for the APJ
regions largest Q113 transaction, the
$220 million deal mentioned above. It wasa smart-mobility deal that targeted tablet
maker Ereben Information Technology.1
In another deal linked to smart mobility, PE
firms CITIC Capital of China and Singapores
Temasek Holdings agreed to buy AsiaInfo-
Linkage for $890 million. AsiaInfo-Linkage
provides customer-relationship management
(CRM), billing, analytics and other solutions
to telecom services providers in China.
Another top five deal focused on online
video, with Chinese internet search company
Baidu agreeing to pay $370 million to
acquire the video business of PPStream;
Baidu plans to merge the acquired business
with its existing online-video platform.2
In another top five deal, Funai Electric
Company Ltd. agreed to acquire inkjet-
printer technology and assets, including
patents, from Lexmark International, Inc., for
$100 million. The deal with Funai, which
has been manufacturing inkjet printers for
Lexmark since 1997, completes Lexmarks
exit from the inkjet printer business,allowing it to focus more on its software and
services, including content management.3
Rounding out the top five deals is a
$113 million deal in which the Australian
accounting software company, MYOB
Finance, acquired New Zealand-based
BankLink, whose process automation
software enables data transfer among
financial institutions, accounting practices
and small businesses.
Global technology M&A update: AprilJune 2013
Regional snapshot: Asia-Pacific* and Japan
PE deals drive value increase;
volume declinesMore PE activity than weve seen in Asia-Pacific and Japan (APJ) in
nearly two years helped APJ achieve the largest YOY aggregate value
percentage increase of any region in Q213, although volume declined
by more than the global average. Smart mobility and cloud/SaaS drove
many of the regions deals.
*Asia-Pacific includes India.
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Deals announced Q212 Sequential % changeQ213
Figure 9: Asia-Pacific and Japan transactions scorecard, Q213
55 44 15% 20%
15 8 50% 47%
$2,551 $1,047 117%
59%
$170 $131 337% 23%
Q2 Q3 Q4 Q1 Q2
2 4 N/A 100%
0 3 N/A N/A
$0 $2,293 N/A N/A
$0 $764 N/A N/A
Corporate and PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
57 48 8% 16%
15 11 31% 27%
$2,551 $3,340 592% 31%
$170 $304 913% 79%
PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
Corporate
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)Average value of deals with disclosed values ($m)
YOY % change
Figure 8: Top five Asia-Pacific and Japan deals, Q213 (corporate and PE)
Buyer Disclosed Announced Deal type Premium
value ($m) offered
Tsinghua Holdings Co. Ltd. to acquire Spreadtrum Communications, Inc. $1,389 21 Jun PE N/A
CITIC Capital Holdings Limited/Temasek Holdings to acquire AsiaInfo-Linkage, Inc. $890 13 May PE 5%
Baidu, Inc. to acquire PPStream, Inc. $400 25 Apr Corporate N/A
MYOB Finance NZ Ltd. (a subsidiary of MYOB Holdings Pty Ltd.) acquired BankLink$113 14 May Corporate N/A
from Media Transfer Services Ltd.
Funai Electric Company Ltd. to acquire inkjet-printer technology and assets, including
$100 2 Apr Corporate N/Apatents, from Lexmark International, Inc.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
PE contributes
69%($2.3 billion) of APJaggregate value.
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EMEA buyers targeted growth
in Q213, whether through
technologies such as big data
analytics or advertising and
marketing, or by positioning
themselves for opportunities in
emerging markets.
Staffan Ekstrm
Transaction Advisory Services LeaderEMEIA
EY
18
Volume rose 6% YOY to 147 deals in EMEA,
compared with a global average decline of
14%. But aggregate value fell by 68% YOY to
$2.4 billion, compared with a global average
that was flat YOY. The size of the EMEA
decline was primarily because the year-agoquarter included the $4.5 billion SAP-Ariba
deal, without which aggregate value would
have fallen only 20%.
Sequentially, EMEA volume and value both
climbed, by 4% and 73%, respectively. This
sequential increase in value continued the
remarkable pattern of alternating up and
down quarters that we have observed for
more than two years. The most recent
12 months of that pattern are shown in
the micro plotline for total deal value in
Figure 11 (page 19).
Of note, the largest EMEA deal of Q213
SAP-hybris is somewhat similar to last
years SAP-Ariba deal (though smaller).
Ariba offered B2B e-commerce SaaS and
a B2B online collaboration network or
marketplace. Switzerland-based hybris
marketing technology is a different B2B
e-commerce platform, delivered as SaaS
or on-premise, with analytics capability
that SAP plans to integrate with its HANA
in-memory real-time analytics technologyto deliver detailed customer insights.1 Also
during Q2, SAP acquired KMS Software for
an undisclosed value; KMS is a SaaS
provider that helps businesses to manage
the process of on-boarding new employees.
The other four of the top five transactions
by EMEA purchasers targeted US companies.
Like SAP-hybris, IT services firm Accentures
completed $316 million acquisition of
Acquity Group also focused on marketing
technology. Acquity provides online marketingcampaign creation and management,
including social media marketing. Dassault
Systmes $205 million agreement to acquire
Apriso Corporation, a provider of software
that helps businesses manage global
manufacturing networks, was just one of
four Dassault Systmes deals in Q213 (and
the only one with a disclosed value). Apriso
expands Dassault Systmes beyond its 3D
design software into manufacturingsoftware. In all, the deals position Dassault
Systmes for continued growth, particularly
in its emerging market operations, such as
in China.2
Rounding out the top five deals were two
non-technology buyers of technology
companies. In security, Tyco International
acquired Exacq Technologies for
$150 million a deal that will add Exacqs
video-surveillance technology to Tycos
range of physical premises security
offerings. The last top five deal illustrated
the value of big-data analytics in life sciences,
where techniques, such as automated gene
sequencing, are generating vast amounts
of data faster than it can be analyzed.
Netherlands-based QIAGEN, a non-
technology provider of laboratory sample
and assay products, acquired Ingenuity,
which offers a knowledge base and analytics
tools that researchers can use to interpret
and analyze complex biological data.3
Despite these four deals, Americascompanies purchased far more value
from EMEA targets than EMEA did from the
Americas. Americas companies purchased
$2.8 billion (67%) of the $4.2 billion in CB
value sold by EMEA companies, representing
a 279% sequential increase over Q113 but
a 53% decline YOY. Q213 deals included
Googles $1.1 billion purchase of Waze
and Canada-based PE firm OMERS Capital
Partners $607 million deal to acquire Civica
plc, a UK specialist IT and business process
services provider to the public sector. EMEAvolume purchased by Americas companies
declined 39% YOY and 9% sequentially to
48 deals, with US companies buying 45 of
those deals.
Global technology M&A update: AprilJune 2013
Regional snapshot: Europe, Middle East and Africa (EMEA)
Volume climbs but total value falls
EMEA was the only region to increase deal volume in Q213, although value
fell by more than the global average. As also seen in the Americas, the big
deal drivers of mobile-social-cloud and big data analytics were joined here
by advertising and marketing technologies.
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Deals announced Q212 Sequential % changeQ213
Figure 11: Europe, the Middle East and Africa transactions scorecard, Q213
127 136 0% 7%
30 33 38% 10%
$6,366 $2,300 99% 64%
$212 $70 46% 67%
Q2 Q3 Q4 Q1 Q2
12 11 83% 8%
3 1 75% 67%
$1,085 $67 69% 94%
$362 $67 24% 81%
Corporate and PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
139 147 4% 6%
33 34 21% 3%
$7,451 $2,367 73% 68%
$226 $70 43% 69%
PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
Corporate
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
YOY % change
Figure 10: Top five Europe, Middle East and Africa deals, Q213 (corporate and PE)
Buyer Disclosed Announced Deal type Premium
value ($m) offered
SAP AG acquired hybris AG $1,000 5 Jun Corporate N/A
Accenture plc acquired Acquity Group Ltd. $316 17 May Corporate 86%
Dassault Systmes S.A. acquired Apriso Corporation $205 29 May Corporate N/A
Tyco International Ltd. acquired Exacq Technologies, Inc. $150 19 Jun Corporate N/A
QIAGEN N.V. to acquire Ingenuity Systems, Inc. $105 29 Apr Corporate N/A
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
EMEA was the onlyregion to increase
deal volume,
by 6%YOY.
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Appendix of additional charts
22 Global technology corporate and PE transactionsscorecard by sector
23 Cross-border corporate and PE transactionsscorecard by sector
24 Global corporate and PE deals by acquiringcountry: cross-border and in-border
25 Cross-border deal value flow for technology deals
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Figure 12: Global technology corporate and PE transactions scorecard by sector, Q213
Number of deals
Q212 Sequential% change
Q2 Q3 Q4 Q1 Q2 Q213 YOY %change
Average value ($m)
Q212 Sequential% change
Q2 Q3 Q4 Q1 Q2 Q213 YOY %change
Corporate deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
PE deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
Total deals by sector
CECPE
Internet
IT services
Semiconductors
Software/SaaS
Total
39 12 50% 69%
29 38 10% 31%
143 77 14% 46%
150 146 15% 3%
31 26 86% 16%
284 271 1% 5%
676 570 7% 16%
$110 $167 N/A 52%
$380 $35 100% 91%
$291 $1 -86% 100%
$538 $558 138% 4%
$5 $701 1,302% 13,920%
$296 $1,080 2,104% 265%
$300 $631 65% 110%
$176 $114 51% 35%
$324 $101 53% 69%
$213 $191 516% 10%
$185 $135 25% 27%
$166 $124 46% 25%
$188 $223 313% 19%
$202 $174 67% 14%
$171 $134 43%
22%
$328 $96 96% 71%
$224 $144 397% 36%
$211 $198 4% 6%
$155 $239 42% 54%
$191 $350 548% 83%
$211 $249 19% 18%
4 4 N/A 0%
4 5 0% 25%
12 13 225% 8%
6 8 53% 33%
3 2 100% 33%
23 25 32% 9%
52 57 24% 10%
43 16 33%
63%
33 43 9% 30%
155 90 4% 42%
156 154 19% 1%
34 28 87% 18%
307 296 1% 4%
728 627 5% 14%
CE = Communications equipment
CPE = Computers, peripherals and electronics
The left side of Figure 12, above, shows how the current three consecutive quarters of declining global technology M&A deal volume breaks down bysector. Transaction volume is down YOY by 14% overall, and fell in every sector except CPE. That is no big victory, however, since the Q212 numberbeing compared to (33 deals) is the lowest quarterly CPE volume in more than three years, since Q309.* Sequentially, just semiconductors and
software/SaaS managed to increase deal volume over the doldrums of Q113.
Average value results were much more encouraging, especially taking into account the Q113 skew from the Dell megadeal. The figure shows overallaverage value up 18% YOY but down 19% sequentially; excluding the Dell deal, the $249 million Q213 average value would represent a 142% increaseover Q113. The four sectors showing sequential increases each had one or more deals above $1 billion, while the two that declined (CE and CPE) didnot. There were five such deals in the software/SaaS sector, including the $6.9 billion deal to take BMC Software private. Consequently, software/SaaSwas the only sector to achieve its highest average of the last four quarters in Q213 in fact, at $350 million per deal, the Q213 average forsoftware/SaaS is at its highest in the five years we have collected this data.*
*Though based on two different data sources, we believe these comparisons are useful from a directional perspective. For a full explanation of our methodology, see page 27.
Note: average value based on deals with disclosed values.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
Software/SaaS achieves highest quarterly average value; CPE is only sector to increase volume YOY
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CE = Communications equipment
CPE = Computers, peripherals and electronics
After falling at roughly the same rate as IB deals for three consecutive quarters, the decline in CB deal volume accelerated past IB in Q213. Of the101 deal YOY falloff in Q213 for all deals, 60 were CB deals and 41 were IB. Consequently, CB deals represented 31% of all-deal volume in Q213, downfrom 33% in each of the three preceding quarters and 35% in Q212. The 24% YOY and 10% sequential declines shown above compare with 14% and 5%,
respectively, for all deals (see Figure 3, page 7). Semiconductors was the only sector to buck the downward trend both YOY and sequentially. Fiftypercent of the semiconductor deals were CB in Q213, which is typical for the sector.
Sequentially, CB average value bounced back from the lowest quarterly average value ($65 million in Q113) weve seen in the five years weve collectedthis data*, increasing 120% to $143 million. But that was not enough to reverse the 1.5-year trend of CB average value falling faster than all-deal averagevalue. For the two years before Q312, CB average value was higher than all-deal; in Q312, it fell 9% below. The trend continues: CB average value was32% lower than all-deal average value in Q412, 37% lower in Q113 (not counting the Dell deal) and now 43% lower in Q213. Of note, the 41% YOYdecline shown in the chart above compares with an 18% YOY increase for all-deal average value (see Figure 3, page 7). We continue to believe thatmacroeconomic conditions are holding down CB deal volume and value more than IB due to the added complexity and risk inherent in CB transactions.
*Though based on two different data sources, we believe these comparisons are useful from a directional perspective. For a full explanation of our methodology, see page 27.
Note: average value based on deals with disclosed values.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
Figure 13: CB corporate and PE transactions scorecard by sector, Q213
Number of CB deals
Q212 Sequential% change
Q2 Q3 Q4 Q1 Q2 Q213 YOY %change
Average CB value ($m)
Q212 Sequential% change
Q2 Q3 Q4 Q1 Q2 Q213 YOY %change
Total CB deals by sector
CECPE
Internet
IT services
Semiconductors
Software/SaaS
Total
PE CB deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
$0 $0 N/A N/A
$0 $0 N/A N/A
$0 $0 100% N/A
$0 $662 183% N/A
$0 $0 100% N/A
$573 $607 767% 6%
$573 $635 452% 11%
Corporate CB deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
17 6 50% 65%
12 14 22% 17%
45 19 39% 58%
50 41 5% 18%
12 14 75% 17%
106 91 1% 14%
242 185 8% 24%
1 0 N/A 100%
1 1 N/A 0%
3 3 200% 0%
2 2 75% 0%
0 0 100% N/A
6 4 33% 33%
13 10 38% 23%
18 6 50% 67% 13 15 17% 15%
48 22 31% 54%
52 43 9% 17%
12 14 56% 17%
112 95 3% 15%
255 195 10% 24%
$269 $132 238%
51%
$361 $101 461% 72%
$53 $100 488% 89%
$308 $144 9% 53%
$68 $113 79% 66%
$265 $158 222% 40%
$242 $143 120% 41%
$269 $132 238% 51%
$361 $101 461% 72%
$53 $100 426% 89%
$308 $70 44% 77%
$68 $113 51% 66%
$242 $139 216% 43%
$233 $120 126% 48%
CB volume and average value decline faster than in-border
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Figure 14: Global corporate and PE deals by acquiring country: CB and IB, Q213
Corporate deals Q213
Top countries Q212 deals Q2 Q3 Q4 Q1 Q2 Q213 deals % total deals No. IB deals 0% 50% 100% No. CB deals
US 451 355 62% 289 66
UK 45 52 9% 35 17
Canada 39 33 6% 15 18
Germany 11 16 3% 4 12
France 12 15 3% 8 7
India 16 15 3% 6 9
Sweden 11 12 2% 6 6
Netherlands 5 8 1% 1 7
Australia 4 7 1% 4 3
Ireland 7 7 1% 2 5
Japan 20 7 1% 0 7
Other 55 43 8% 15 28
Total 676 570 100% 385 185
PE deals Q213
Top countries Q212 deals Q2 Q3 Q4 Q1 Q2 Q213 deals % total deals No. IB deals 0% 50% 100% No. CB deals
US 35 37 65% 34 3
UK 7 8 14% 4 4
Canada 3 5 9% 4 1
China/Hong Kong 0 2 3% 2 0
Other 7 5* 9% 3 2
Total 52 57 100% 47 10
Corporate CB volume declines, but other countries partially offset US and UK falloff;
PE CB deals fall 38%
Corporate CB deal volume fell only 8% sequentially, to 185 deals in Q213 from 200 in Q113, despite a 20% falloff by the US and 19% by the UK. Amongthe countries that made up the difference by holding steady or increasing in corporate CB deals were Canada (55% of deals were CB), Germany (75%CB), India (60% CB), Sweden (50% CB), the Netherlands (88% CB), Australia (43% CB), Ireland (71% CB) and Japan, which did all seven of its dealsacross borders. Consequently, the US fell to 36% of corporate CB deals from 41% in Q113, while the UK fell to 9% from 11%. France, meanwhile, did7 corporate CB deals in Q213 after doing 15 in the previous quarter.
Although all-deal PE volume (CB + IB) rose 24% sequentially in Q213, PE CB volume fell to 10 deals from 16 (38%). In this case, the US declined tothree PE CB deals in Q213 from eight in Q113, and the other countries did not make up for the falloff. UK PE deal-makers, however, did increase to fourdeals in Q213 from just one in Q113. The 16 PE CB deals of Q113 were unusually high, given the recent trends for example, higher than in any 2012quarter.
*Additional countries with one PE deal in Q213: Finland, Germany, Latvia, Singapore and South Korea.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
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Figure 15: CB deal value flow for technology deals (disclosed value), Q213 versus Q113
Q213 Q113 CB value acquired$3.2b
CB value sold$3.2b
0%
20%
40%
60%
80%
100%
Other 15%
Asia-Pacific 30%
Europe33%
US11%
Europe30%
Canada 21%
US41%
Japan 1%
Asia-Pacific 1%
Other 1%
Canada 10%
India 3%Japan 4%
CB value acquired$6.4b
CB value sold$6.4b
0%
20%
40%
60%
80%
100%
Other 17%
Asia-Pacific 12%
Europe47%
US
18%
Europe32%
Canada 10%
US51%
Japan 5%
Japan 3%
India 2%
Canada 2%
Total CB value doubles but remains below historical level; Europe and Asia-Pacific are
biggest sellers for second consecutive quarter
At $6.4 billion, CB aggregate value bounced back from a 5-year low of $3.2 billion in Q113 but fell 63% YOY and remained 20% below the lowest 2012quarter ($8 billion in Q412). CB value was just 19% of global all-deal aggregate value, compared with 41% for full-year 2012.
For the first time in two years, the US and Europe did not switch positions as net buyer and seller. The US was a net buyer in Q113 and Europe a netseller; in Q213, the US increased the margin by which it was a net buyer, while Europe increased its margin as a net seller.
The largest CB deal by dollar value was Googles $1.1 billion acquisition of Israels Waze, representing 98% of the value sold by countries in theOther category.
European companies were the largest buyers of European CB deals in Q213, acquiring 41% ($1.3 billion) of the European CB value sold. Seventy-eight percent of that inter-European value came in one deal: the $1 billion SAP-hybris deal, which was the second-largest CB transaction of Q213.
The US acquired 35% ($1.1 billion) of European value sold in nine deals, the largest of which was McAfees $389 million announced deal forFinnish cybersecurity company Stonesoft.
Canadian companies acquired 21% ($640 million) of European CB value. Most of the Canadian value was in one PE transaction: OMERS CapitalPartners $607 million deal for UK-based Civica, a UK specialist IT and business process services provider to the public sector.
Rounding out the buyers of European value was Indias Tata Consultancy Services $97 million deal for Alti SA, a French systems integrator alsooperating in Belgium and Switzerland.
Europe buyers purchased $815 million (70%) of the US value sold in five deals, the largest of which was Accenture-Acquity at $316 million (seeEMEA snapshot, page 18).
US companies bought all of the $784 million CB value sold by Asia-Pacific in five separate transactions.Note: percentages may not total 100 due to rounding.
Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.
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Source notes
26 Global technology M&A update: AprilJune 2013
Rising PE, megatrends and their enablers drive Q213technology M&A
1 US Deal Flow to Remain Stagnant for Remainder of
2013, EY press release, 8 July 2013.
2 BMC deal aims for the cloud; Private investors offer
$6.9 billion with goal of developing technology,
The Houston Chronicle, 7 May 2013, via Factiva,
2013 Dow Jones & Company, Inc.
3 Global technology M&A update: JanuaryMarch 2013,
EY, 2013 EYGM Limited.
4 BMC deal aims for the cloud; Private investors offer
$6.9 billion with goal of developing technology,
The Houston Chronicle, 7 May 2013, via Factiva,
2013 Dow Jones & Company, Inc.5 Microsoft To Partners: We Need You To Migrate
To The Cloud, CRN, 12 July 2013, via Factiva,
2013 Dow Jones & Company, Inc.
6 Top 10 Things To Know About Ciscos Push To The
Cloud, CRN, 10 June 2013, accessed via CRN.com.
7 How 10 VARs Became Cloud Computing Superstars,
CRN, 8 February 2013, accessed via CRN.com.
8 Salesforce.com Acquires ExactTarget,
Entertainment Close-up, 18 July 2013, via Factiva,
2013 Dow Jones & Company, Inc.
9 The Morning Download: CIOs Must Step Up Their
Game, The CIO Report, 21 December 2012,
via Factiva, 2013 Dow Jones & Company, Inc.
10 Report: FTC reviewing Googles acquisition of Waze,
SNL Kagan Media & Communications Report,25 June 2013, via Factiva, 2013 Dow Jones
& Company, Inc.
11 Yahoo Deal to Buy Tumblr Shows Power Shift,
Dow Jones Top North American Equities Stories,
20 May 2013, via Factiva, 2013 Dow Jones
& Company, Inc.
12 Vista Equity Partners to Buy Websense, The Wall
Street Journal Online, 20 May 2013, via Factiva,
2013 Dow Jones & Company, Inc.
13 451 M&A KnowledgeBase Daily, 451 Research LLC,
24 April 2013, 2000-2013 451 Research LLC.
14 Cloud vendors add MBaaS and mobile app
development tools for the enterprise, 451 Research
LLC, 15 April 2013, 2000-2013 451 Research LLC.
15 Facebook bets on MBaaS as it buys Parse for mobile
apps, 451 Research LLC, 26 April 2013,
2000-2013 451 Research LLC.
16 3-D Printing Leader Stratasys to Buy Makerbot,
The Wall Street Journal Online, 19 June 2013,
via Factiva, 2013 Dow Jones & Company, Inc.
Top of mind: Technology transformations, headlines
drive security consolidation
1 Worldwide IT Security Products 2012-2016
Forecast and 2011 Vendor Shares: Comprehensive
Security Product Review, IDC, November 2012,
2012 IDC.
2 IDC Analyst Connection: Secure, Compliant
Collaboration in the Cloud, IDC, March 2012,
2012 IDC.
3 IDC Lowers Expectations for IT Spending as
Sequester and Global Economic Uncertainty Take a
Bite Out of Business Confidence, IDC Press Release,
14 May 2013, 2013 IDC.
4 Worldwide IT Security Products 2012-2016
Forecast and 2011 Vendor Shares: Comprehensive
Security Product Review, IDC, November 2012,
2012 IDC.
Regional snapshot: Americas
1 BMC deal aims for the cloud; Private investors offer
$6.9 billion with goal of developing technology,
The Houston Chronicle, 7 May 2013, via Factiva,
2013 Dow Jones & Company, Inc.
2 Fidelity National Agrees to Buy Lender Processing
for $2.9 Billion, Dow Jones Top North American
Equities Stories, 28 May 2013, via Factiva, 2013
Dow Jones & Company, Inc.
3 Salesforce.com Acquires ExactTarget,
Entertainment Close-up, 18 July 2013, via Factiva,
2013 Dow Jones & Company, Inc.
4 IBM To Acquire SoftLayer To Accelerate Adoption Of
Cloud Computing In The Enterprise, Dow Jones News
Service, 4 June 2013, via Factiva, 2013 Dow
Jones & Company, Inc.
Regional snapshot: Asia-Pacific and Japan
1 Global technology M&A update: January-March 2013,
EY, 2013 EYGM Limited.
2 Baidu Acquires Online Video Business of PPS for US
$370 Million to Create Chinas Largest Online Video
Platform, Investment Weekly News, 25 May 2013,
via Factiva, 2013 Dow Jones & Company, Inc.
3 Funai takes over Lexmark inkjet business,
BusinessWorld, 9 May 2013, via Factiva, 2013
Dow Jones & Company, Inc.
Regional snapshot: Europe, Middle East and Africa
1 SAP to Acquire hybris to Deliver Next-Generation
Customer Experience, ENP Newswire, 6 June 2013,via Factiva, 2013 Dow Jones & Company, Inc.
2 451 M&A KnowledgeBase Daily, 451 Research LLC,
25 April 2013, 2000-2013 451 Research LLC.
3 Qiagen Acquires Ingenuity Systems for $105 Million,
GlobalData Financial Deals Tracker, 30 April 2013,
via Factiva, 2013 Dow Jones & Company, Inc.
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27
Global technology M&A update: April
June 2013 is based on EYs analysis of
The 451 Group M&A KnowledgeBase data
for 2012 and 2013. Deal activity and
valuations may fluctuate slightly based on
the date the database is accessed.
Technology company M&A data was pulled
from The 451 Group M&A KnowledgeBase
based on the databases own classification
taxonomy, and deals were then aligned
to the following sectors: CE, CPE,
semiconductors, software/SaaS,
IT services and internet companies.
Alignment was based on the sector of
the target company.
The data includes M&A transactions
between two technology companies,
technology companies acquiring non-
technology companies, as well as
non-technology companies acquiring
technology companies.
Joint ventures were not included.
Corporate M&A activity data was analyzed
based on the sector classification of the
target company. Prior to 2012, we
reported based on the classification of the
acquiring company; the change enables
a clearer picture of the technologies being
focused on for acquisition.
Equity investments that involved less than
a 50% stake were not included in the data.
PE M&A activity includes both full and
partial stake transactions in excess of 50%
and was analyzed based on acquisitions
by firms classified as private equity,
sovereign wealth funds, investment
holding companies, alternative investment
management groups, certain commercial
banks, investment banks, venture capital
and other similar entities.
Unsolicited technology deal values were
not included in the dataset, unless the
proposed bid was accepted and the deal
closed based on data available at the time
of analysis.
The value and status of all deals
highlighted in this report are as of
30 June 2013, unless otherwise
no