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pwc deal data indentifies likely it industry acquisition targets

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pwc deal data indentifies likely it industry acquisition targets

posted 2017-01-27
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    pwc tracks top it industry acquisition targets for 2016/2017
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    pwc tracks top it industry acquisition targets for 2016/2017

    pwc's deal insights data for 2016 and 2017 indicates that software and it services sectors will remain attractive targets for corporate acquisitions this year.

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    2016 was a banner year for tech m&a
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    2016 was a banner year for tech m&a

    last year was an impressive year for technology mergers and acquisitions, pwc data shows. the company counted 1,613 acquisitions, totaling $323.5 billion in cumulative transaction value. while the number of acquisitions was down by 16 percent compared to 2015, the total value was up 3 percent year over year, thanks to a larger number of big deals.

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    there were 61 deals that exceeded $1 billion
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    there were 61 deals that exceeded $1 billion

    according to pwc, 2016 saw an “explosion of multi-billion dollar transactions.” the year saw 61 deals that exceeded $1 billion in value, including 11 that were greater than $5 billion. the number of deals worth $1 billion or more nearly doubled year over year, amounting to $261 billion.

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    'non-digital buyers' snap up it companies
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    'non-digital buyers' snap up it companies

    non-digital buyers, or those that might not have a major online technology presence, were very active last year. in the fourth quarter alone, they bought 167 technology companies. according to pwc, "non-digital buyers" are acquiring technology companies to expedite their “transition into more digital business models.” those non-digital buyers are most likely to be retail, automotive and healthcare companies.

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    software is in high demand
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    software is in high demand

    software proved to be the most sought-after segment last year, with a total of 659 deals. its deal volume totaled $88.4 billion, topping all other technology industry segments in 2016.

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    it services are important
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    it services are important

    the it services segment e in second place in acquisition in 2016, accounting for 512 deals on the year. however, its total deal volume was $61.9 billion, suggesting companies paid less for it services firms compared to others in different segments.

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    big investments in semiconductors
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    big investments in semiconductors

    semiconductor companies weren’t necessarily in high demand, but when they did sell in 2017, they fetched high prices. in fact, fewer than 100 semiconductor companies were acquired last year, but their deal volume reached $78.3 billion, putting them in second place behind software for the most segment spending.

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    the u.s. is still the epicenter
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    the u.s. is still the epicenter

    the united states is still the place to be for companies hoping to be acquired. during 2016, 1,398 of the more than 1,600 technology companies that were acquired were headquartered in the united states. europe e in second place with 97 deals. asia-pacific tallied 59 deals and africa/middle east saw 12 acquisitions.

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    acquisition multiples soar
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    acquisition multiples soar

    multiples, or the metrics by which companies are acquired, were up in 2016. according to pwc, the software segment’s revenue multiple led all others at 3.5x. it also was tops in earnings before interest, taxes, depreciation and amortization (ebitda), where its multiple stands at 18.8x. hardware companies fetch the smallest multiples with values based on revenue at 1.4x and ebitda at 12.2x.

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    software acquisitions in 2017 will continue
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    software acquisitions in 2017 will continue

    while pwc didn’t put an actual figure to it, the company says technology buyers will be eyeing software companies foremost in 2017. they suspect buyers will focus on software firms operating in the cloud and artificial intelligence.

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    expect to see more buyers in 2017
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    expect to see more buyers in 2017

    although multiples are rising and competition is already fierce for technology companies, pwc doesn’t see the acquisition trend slowing anytime soon. quite the contrary: the consulting firm says more buyers—including private equity companies, non-digital buyers and others—will be looking for targets in the new year. but pwc doesn’t anticipate any big semiconductor acquisitions in 2017.

the technology industry continues to be a bed of acquisition activity, new data from pwc shows. the worldwide consulting firm in january released its annual deal insights data for 2016 and 2017. the firm found that more than 1,600 technology deals were announced last year, including 11 that were valued at more than $5 billion each. its data suggests the software and it services sectors are among the most attractive in the mergers and acquisitions field. companies and startups in cloud computing, artificial intelligence and the internet of things are expected to be sought-after m&a targets in the coming years. in fact, in its look ahead to 2017, pwc reported that companies in the cloud software industry will be in especially high demand. this slide show will dig into far more detail about the pwc technology industry acquisition data and outline the market segments that could see significant merger activity this year.

don reisinger is a freelance technology columnist. he started writing about technology for ziff-davis' gearlog.com. since then, he has written extremely popular columns for cnet.com, computerworld, informationweek, and others. he has appeared numerous times on national television to share his expertise with viewers. you can follow his every move at http://twitter.com/donreisinger.