Dealmaking in the technology, media and telecommunications sector has benefited from a convergence of several trends. Companies that halted investment in innovation during the recession are still catching up, leveraging both organic growth and M&A.
Plus, a sea change in consumer habits has occurred, as the iPhone and other smart phones have gotten smarter and more popular. And Internet companies, such as Amazon.com Inc. (Nasdaq: AMZN), Google Inc. (Nasdaq: GOOG) and Yahoo Inc. (Nasdaq: YHOO) have matured, becoming avid acquirers along the way, competing fiercely with each other by so-called acqui-hiring.
A mega-merger in the tech sector seems likely. In September, China’s Alibaba Group Holding Ltd. (NYSE: BABA) raised $21.8 billion in the largest tech initial public offering ever. Led by CEO Jack Ma, now the richest person in China, Alibaba has already spent $4.6 billion in acquisitions in 2014. Some speculate that the e-commerce giant may try to buy Yahoo Inc. (Nasdaq: YHOO), which holds 16 percent of Alibaba.
Another potential bidder for Yahoo is Japanese telecommunications company SoftBank. Led by CEO Masayoshi Son, the second-richest person in Japan, SoftBank retains 32 percent of Alibaba. Recently, SoftBank invested $250 million in Legendary Entertainment, producer of the “Godzilla” film, gaining some online rights to the independent studio’s film, TV and merchandise businesses.
In middle-market M&A, look for more deals in e-commerce, 3D printing and business software, especially in analytics and cyber security. For a look at recent deals in the sector, see 12 Important Tech Deals of 2014.