There’s no doubt technology trends are making for an active dealmaking environment in the technology industry. The expansion of cloud-centric offerings from formerly on-premise products and services will remain a driver of change within the industry for years to come. Early adopters are tackling more developed concerns such as compliance, different migratory patterns for different business lines—which can spark different patterns of mergers and acquisitions (M&A), as well as research and development (R&D). Meanwhile, those slower-moving enterprises that are just now examining their options when it comes to basing their products in the cloud will also potentially drive further consolidation within the information technology space going forward.
As companies implement technology, they need to proactively manage and mitigate risks. Although the move toward cloud-based offerings seems inexorable at this point, concerns around security will only become more paramount. Accordingly, those companies that can distinguish themselves further in that arena should enjoy continued premiums. Innovation in that area will also remain highly prized.
Key highlights from 2016:
- The third quarter of 2016 was a blockbuster by multiple measures, with the total deal value hitting no less than $101 billion, even as the median transaction size soared to $102 million. The fourth quarter saw a return to more historically appropriate figures was likely, with the median transaction size of $43.8 million.
- 2016 saw a slight increase in private equity (PE) deal volume. But even with PE firms’ interest in the technology space, if high prices persist, a gentle subduing of deal volume could be in the cards for 2017.
- Financial buyers actually accounted for a greater percentage of take privates in 2016 than they did in 2015. Moreover, PE’s proportion of overall M&A soared to a new high during the past four years, testifying to the pressures of persistently high dry powder, as well as the differing investment theses common to PE players within the technology space nowadays.
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