Technology M&A – Trends and Themes
“The overall pace of M&A in the tech sector is at record levels,” according to Rory O’Sullivan, a managing director at Pagemill Partners, a division of Duff & Phelps, which advises both buyers and sellers in M&A transactions around the world. As a keynote speaker at TechConnect Live, Ireland’s largest technology event, which was held at the RDS, Dublin, on the 31st of May 2017, Rory O’Sullivan outlined the key trends and themes within the €600 billion European technology M&A market.
With over 20 years of experience of M&A and corporate finance within the technology industry, Rory O’Sullivan is an accomplished dealmaker with experience of over 50 transactions totalling in excess of $5 billion in value across enterprise software/SaaS, internet, information services, semi-conductors and communication technology.
Cloud related deals accounted for 28% of European M&A last year and interest in the software sector also remains strong, with the level of activity increasing by 4 times between 2012 and 2016. Internet of Things related deals drove 18% of M&A activity in 2016, while AI, security and mobility are also fuelling market growth.
A key feature of the marketplace has been the emergence of private equity as major buyers of software businesses. Indeed, private equity buyers accounted for 40% of technology M&A in 2016 and HG Capital is now the third largest software group in Europe.
“Private equity has become a force to be reckoned with in the software market,” he pointed out. “As software has migrated to a subscription-based model, it has become increasingly attractive to financial buyers,” as the financial returns are now more predictable. The wide availability of capital is also allowing financial buyers to outbid corporate buyers.”
“Non-traditional technology buyers, such as Siemens, are also becoming more prominent in the marketplace and accounted for 28% of M&A activity last year. “Every business is becoming software enabled,” he said. “Non-traditional technology buyers are often prepared to pay aggressive prices.”
Another key market trend is the rise of Chinese outbound technology buyers, a sector which has grown by over three times in the last five years. Chinese capital constraints are now impacting the value of these deals but not the volume.