Watch influencers offer predictions on major tech acquisitions
The second half of 2010 is looking better than last year, a surge is expected, heralding a very hectic end of year M&A traffic jam
Few things affect the innovation game as much as major acquisitions (although acquisition of a vibrant startup can often involve reasons and outcomes which have little to do with innovation) and the fortune-tellers in this video (courtesy of The Deal Pipeline) can foresee very significant acquisitions (and difficulties coping with them) in our immediate future.
Are sentiments mixed?
Well, my impression is that there’s mostly good news for those looking for higher numbers and scale of acquisition stories, but bad news in terms of how well the acquisitions themselves will be handled.
“!8 months ago … most of the companies that were for sale were distressed sales, I think that extended to some degree in 2009, but in 2010 I think we’re back to a more balanced, normal M&A market, at least in technology” Jim Hemmer, CEO of Antenna software
“There’s … spaces which we believe are probably going to be the most ripe for acquisitions … the mobile advertising platform application space … cloud computing, security around it … also the data center space being more efficient” Megan Scheffel, senior vice president, Silicon Valley Bank
“The fourth quarter has the potential to be more or less of a disaster … too many deals in the market … too many people trying to rush for the 12/31 window, service providers like the accounting firms and law firms inundated with activity which makes it harder to get the deals done, so it’s going to be a very interesting quarter to watch” Scott Peters, Co-President, Jordan Edmiston Group
“it’s absolutely the case that the service organisations are going to get probably crushed … the banks cut back tremendously on their people, the law firms stopped bringing in their new hires, so everything slowed down from an onboarding of talent and people, but even if you brought them on, there was nothing to work on … so where’s the experience level? … so everybody’s going to get a world of experience in a very short period of time” Greg Peterson, National leader for private equity PriceWaterhouseCoopers US Tranaction Services
As regular iij readers will know, we’re always on the lookout for sources of videos which cover issues which are relevant to innovation investment and TheDeal looks like a real find!
I’ve already decided to do an iij article after looking at their video on the VC gender gap
And, if your innovation investment interests tend to put you in the innovation-focussed side of things rather than being an avid investment news follower, then you might be unfamiliar with the general flavour of the everyday tech M&A reporting scene, so here’s a sample from CNN:
“Few things affect the innovation game as much as major acquisitions (although acquisition of a vibrant startup can often involve reasons and outcomes which have little to do with innovation) and the fortune-tellers in this video (courtesy of The Deal Pipeline) can foresee very significant acquisitions (and difficulties coping with them) in our immediate future.”
I wanted to know more on how M & A affect innovation. I found
http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1147&language=english
The article describes in detail how M & A affect innovation and R & D, but one of the risks identified by the author is quite disturbing.
“One of the most important risks after any merger is that these organizational upheavals could provoke key R&D employees to abandon the company.”
So, how can acquiring company mitigate this risk and keep innovation on rise?
This might be a problem, although in many cases, company that is acquiring brings in their own people, with R&D departments as well. Maybe this is why in some cases, key R&D employees leave, they know they are going to be swapped with somebody from buying company anyway.
This part got me thinking:
“The fourth quarter has the potential to be more or less of a disaster … too many deals in the market … too many people trying to rush for the 12/31 window, service providers like the accounting firms and law firms inundated with activity which makes it harder to get the deals done, so it’s going to be a very interesting quarter to watch”
I was wondering what were the most interesting deals so far on tech market. I have found nice slideshow for 2010 on this site:
http://www.networkworld.com/slideshows/2010/mergers-and-acquisitions.html#slide3
Intel’s acquisition of McAfee for almost $7.7 billion is making your eyebrows raise.
Similar story goes with database maker Sybase. More on that here (just keep in mind it is from May 2010):
http://www.usatoday.com/tech/news/2010-05-18-techacquisitions18_CV_N.htm
“Just last week, SAP plunked down $5.8 billion on database maker Sybase in the biggest tech deal of the year.”
Those are absolutely huge acquisitions, wonder if we can expect some more spectacular deals like that by the end of this week. Any leaks, anyone?
Uhh, I meant by the end of this year. where did I get end of this week?
What is driving M & A of that bigger extents? Does this harbinger end of recession by the end of the year 2010?
The slides below discuss general drivers of merger and acquisition.
http://www.aiaa.org/tc/mgt/presentations/aerospace_industry_investement(merger_and_acquisitions).PDF
Greg, can you find some specific information on boom in M & A in present times?
I wouldn’t say it can be related to end of recession by the end of this year. I think we are in deeper trouble with our economical crisis. Such acquisitions happened in, for example, 2009 (XeroX buying ACS for almost $6,5 bilion), and we all know that crisis was still here in 2010.
Why such serious acquisitions happen, even in our economically troubled times? I think it is the question we should try to answer – what does it give to companies during time of economical crisis?
May be because bigger companies can buy talent and assets at lower rates during economic crisis!
This might be one of the options – although keep in mind those companies are affected by the crisis as well, so less funding for this kind of deals. But surely, they can buy at better prices.
“Plunging valuations have also made takeover targets more attractive to buyers. A year ago, for example, Palm was valued at $2 billion.
“We are seeing a return to normal,” Fisher says, though not as frenzied as 2006 and 2007, when the availability of cheap credit spurred buying binges.”
This sums it up all nicely I think. Taken from:
http://www.usatoday.com/tech/news/2010-05-18-techacquisitions18_CV_N.htm
We tried discuss M & A affects innovation and got few ideas. Now let us look conversely, how does innovation affect merger and acquisition?
This is a good question AflatoonS. Surely it does influence the chances of acquisition.
In one of the articles I have linked above, there is sentence covering this aspect:
http://www.usatoday.com/tech/news/2010-05-18-techacquisitions18_CV_N.htm
“Buyers are paying more for small, innovative companies in high-growth areas with long-term potential, says Joe Steger, who studies tech mergers for Ernst & Young.”
Innovation is attracting potential buyers, no doubt about that.
I found a detailed paper on how innovation attracts potential buyers, but you need to pay in order to read full paper
http://www.springerlink.com/content/fh5g2j8878327091/
Nice find, shame can’t be viewed in full. Would be interesting to see a detailed report on that.