Technology Industry Report

March 22, 2018

Exec Summary

Tech industry deal volumes were higher in 2017 compared to the previous year, albeit with total gross deal value declining. This suggests that there is a trend away from mega deals, towards the acquisition of smaller and earlier stage tech companies. This is a trend that has been noted by various commentators for some time.

Larger companies, both within technology focused markets and those in other industries, are using tech acquisition to get ahead, or catch up, with current tech trends. Our insights piece comments on this in more depth.

In term of popular sectors, artificial intelligence continued to grow its rapid growth in 2017 through increased fundraising, acquisitions and widespread adoption. The first half of 2017 saw total investment in AI firms hit a record $22.9bn, according to research by JP Bullhound. The same research suggested investments in SAAS companies almost doubled in the first half of 2017, when compared to the same period in the prior year, to $3bn. Many sectors have seen an increase in activity, however, as businesses look to push ahead with their tech strategies.


Tech targets

Research from various sources suggests that acquisition of technology assets now ranks at the top of strategic drivers for M&A deals.

Almost every sector has been affected by developments in digital and mobile technologies, from improvements in manufacturing, robotics and quality control, through to the more intangible disruption of supply chain and client relationship management. Digital disruption has evolved from a term used solely within the tech sector, to a point rising ever higher up the agenda for senior management teams, and within a wider and wider range of industries. Tech strategy cannot be ignored, and are continuing to become a growing benchmark of success.

The increased use of digital technologies in these non-tech industries has prompted an increase in the level of tech M&A. As the pace of technology-driven change accelerates, acquisitions have become a genuine instrument of choice for the closing of innovation gaps. Acquisitions of high-tech targets have been utilised by buyers looking to boost innovation and streamline operations and processes, without having to invest the time – or the talent – developing this innovation in house.  It is estimated that half of M&A deals involving technology targets in Q4 of 2017 involved non-tech acquirers.

High profile examples include the Intel’s acquisition of Mobileye, a company involved in autonomous driving and Internet of Things, for $15bn in August 2017. Samsung acquired Harman International, which is involved in building connected car solutions, including navigation and driver-assistance systems, for $8bn in March 2017.

With continued excitement surrounding developments in areas including artificial intelligence, connectivity of physical devices, the internet of things, and the implications of all things tech on big data, 2018 is anticipated to see a continued trend of businesses using acquisition to implement their tech growth strategies. Risks will need to be taken in board rooms by those looking to get ahead… and indeed not be left behind!

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