Instagram, Schminstagram. While flashy consumer deals keep getting all the headlines, it was actually cloud computing, enterprise and video that fueled the biggest deals of last quarter’s $25.1 billion in mergers and acquisitions, according to top-tier accounting firm Ernst & Young.
The total value of all deals fell by 12 percent from the year before while the number of deals was about the same, according to a report the firm published today. While that’s not too huge a drop, the firm attributes it to “ongoing economic uncertainty.” (Thanks Greece.) Quarterly deal volume has apparently reached a plateau after two years of growth and is being restrained by concerns about the macroeconomic climate.
If you’re curious what the biggest deals of last quarter were, here are they below. The leaderboard is topped by enterprise deals like Cisco’s $5 billion agreement to buy NDS Group and Oracle’s $2 billion deal to buy Taleo, which helps companies manage recruiting. There is also a consumer-facing deal in there with Youku, China’s version of YouTube, merging with its rival Tudou Holdings Ltd. for $1.1 billion in a pending acquisition. Instagram’s $1 billion deal doesn’t count because it happened after the quarter ended. If it was here, it would show up in seventh place.
Ernst & Young says there are five megatrends driving deal-making. Basically, they include smart mobility, cloud computing, social networking and “big data” analytics. Shocker. Then there is one extra one, which Ernst calls “blur” or “convergence, as technology sectors come together and the technology industry enters other industries as enabling innovation.” (Yes, “blur” is a big trend these days. Haven’t you heard?)
Cloud computing and software-as-a-service deals had both the biggest number of deals and the biggest transaction sizes. The biggest deal of the quarter looped in both trends. Cisco’s $5 billion deal to get NDS will give the Silicon Valley networking giant a video software and content security solutions provider that’s a backbone of the pay TV industry. The Tudou-Youku deal also skews the size of video and online gaming transactions.
The Americas led most of the acquisitions, with 75 percent of global deal volume and 87 percent of global deal value. Buyers in Asia also tended to buy targets in other parts of the world. M&A activity dropped off dramatically in Europe thanks to continuing economic malaise there.
Joe Steger, who leads global technology industry transaction advisory services, says the overall economic climate will keep M&A activity flat or slow this year.
So here are a few more charts from the report:
Again, here’s another way to look at how software-as-a-service is leading deals, representing $11.5 billion of all the target companies.
Overall, there were were a few really large deals in the $1 billion-plus range that drove overall transactions up. There were also many more deals that didn’t have disclosed prices this quarter.
Something that should keep things exciting for the rest of the year is the huge pile of cash the world’s biggest technology companies are accumulating. Ernst & Young estimates that the top 25 tech companies in the world have $668 billion in cash between them, up from $571 billion the year before. (Thanks Apple.) That should give bigger companies room to write checks for interesting targets.
Europe actually was a net seller as many U.S. buyers picked up companies from across the pond. NDS, for example, originally was founded in Israel.