TechMandA.com Blog

Tech M&A Momentum Picking Up

Mike Casey — Wed, 14 Oct 2009 03:45:41 +0000

Cisco announced today that it is buying Starent Networks for $2.0 billion following last week’s announcement that it is buying Norwegian video conferencing maker Tandberg for $3 billion - signaling the beginning of the Q4 technology m&a rally. With technology firm’s balance sheets wielding healthy cash reserves, we should see increased momentum prior to year end. Smaller, publicly traded survivors may be on the short list for larger firms before valuations rise further.

A Start

Mike Casey — Thu, 24 Sep 2009 14:05:55 +0000

Earlier this week Dell announced the acquisition of Perot Systems. All cash and a 68% premium this transaction is consistent with the theme that I mentioned in my initial post. Dell has a strong cash balance and needs to compete with HP and IBM. This deal is well timed and very strategic for both.

A secondary theme to the back to the future M&A direction is that the larger deals will likely occur earlier in the recovery cycle before valulations recover too much. Look for more in my opinion and a flurry in the 4th quarter as the eonomic data of the third quarter validates the intial phase of the recovery.

Tech M&A - Back to the Future

Mike Casey — Fri, 26 Jun 2009 14:00:19 +0000

The financial crisis of 2008 signaled the end of the era of the private equity backed/financial buyers as limited access to credit reduced their ability to finance acquisitions.

With the financial buyers sidelined and valuations tempering, the decline in the stock market ensured a stall in technology M&A as corporate buyers focused internally. Strategic buyers look for sympathetic decreases in M&A valuations and acquisitions candidates capable of holding off an exit hold on for higher valuations.

Following their restructurings and the stabilization of the economy, strategic buyers are likely to emerge first as drivers of a new wave of technology M&A as they look to capitalize on the lower valuations for strategic targets. The strategic buyers with their cash balances will be motivated by traditional drivers of M&A such as access to products and markets, etc.

Although the stock market has improved in the last quarter and technology is leading the way, we saw only a handful of technology IPOs (four by most accounts) in 2008 and five in 2009 year to date. While promising, it is not likely that public offerings will provide a sufficient exit strategy for most technology businesses as a result of the compliance costs and other challenges in the capital markets. Venture investors with aging portfolio company investments may find a potential M&A exit more attractive.