Software and Internet Deals Thrive while Hardware and Semiconductor Sectors Drive Increasing Deal Values
SAN JOSE, August 6, 2014 –Extending the positive momentum from the second half of 2013, equity markets set new highs, IPO markets reached activity levels not seen in years, VC investments harkened back to 2000 levels, and economic outlooks remained modestly optimistic across sectors, according to PwC’s U.S. Q2 technology deals insights report, released today. Private equity (PE) continued to play an active role in technology, though challenged by strategic buyers who are able to leverage healthy valuations and substantial amounts of cash on hand.
In the second quarter of 2014, PwC found that the number of technology transactions rose, increasing 87 percent over the second quarter of last year. The second quarter ended with 62 transactions completed, mirroring that of the first quarter and continuing the momentum of 2013’s second-half surge. With the 62 transactions totalling $26.7 billion, average deal value totalled $430 million, a slight increase from $406 million in the first quarter, and down from $510 million average over the last 12 months. A total of four transactions in excess of $1 billion closed.
Transaction volume remained active with the software and Internet sectors leading the way in terms of deal volume, but the hardware and semiconductors sectors drove transaction value in the second quarter with some large deal closures. In comparison to the second quarter of 2013, one of the worst in recent years, transaction activity grew substantially with volume up 72 percent and value nearly doubling at 87 percent. There were four deals in excess of $1 billion during the second quarter, slightly down compared to an average of six per quarter over the last 12 months.
“After a strong start during the first quarter of 2014, the second quarter followed suit with an increase in the number of technology deal announcements. While the number of new billion-dollar deals announced remained in line with the first quarter, the volume of smaller and middle market transactions notably grew,” said Rob Fisher, PwC’s U.S. technology industry deals leader. “This upward trend in IPO markets combined with the tremendous pent-up cash balances of the leading technology players bodes well in driving the momentum of technology M&A through the remainder of the year.”
Technology IPOs accelerated pace, adding 22 new pricings with proceeds exceeding $5.1 billion. New publicly announced IPO registrations continued, totalling 20 for the quarter and a number of additional registrations filed confidentially under the rules of the U.S. JOBS Act.
While overall second quarter deal volume aligned with the first quarter, with volume relatively flat and value increasing 4 percent. The software sector continued to stay strong and saw an increase in the number of closed deals.
With the proliferation of Internet-connected and wearable devices, PwC sees the ‘Internet of things’ continuing to evolve, with these trends driving the demand for specialized semiconductor components and software to enhance them. Additionally, cloud, mobile and social are other focal areas driving new forms of innovation and are prime targets for technology players across various sectors.
“We anticipate that the upswing in broader IT spending will encourage top technology companies to start positioning themselves to capture future value by planning for inorganic growth. We expect those actions to further boost the outlook for technology deals,” added PwC’s Fisher.
PwC’s US technology Deals Insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $15 million, as provided by Thomson Reuters through June 30, 2014 and supplemented by additional independent research. Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.
PwC’s Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.
Our local and global deal strength is derived from over 1,400 deal professionals in 21 cities in the U.S. and over 9,800 deal professionals across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.
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