Issue 26 Global technology M&A update - Ernst & Young€¦ · Global technology M&A ... is creating more need for true solutions-oriented selling, ... Average value of deals with

Global technology M&A updateOctober–December 2014 and year in review

Issue 26

2 Global technology M&A | October–December 2014 and year in review

Deal drivers

Cloud/SaaS and smart mobility provided“background radiation” all year as globaltechnology companies used M&A to stack together strategic solutions, stay out of disruptors’ crosshairs and divest“hidden gems.”

• Advertising and marketing, security and internet of things (IoT) aggregate deal values jumped in 4Q14; totals for the firsttwo were more than their year-to-date (YTD) totals through 3Q14.

• For the year, rapidly emerging “sense and respond” economies drove fast growth in IoT and financial services and payments, but a few large deals drove gaming average value higher. n

Deal size Deals above $1 billion grabbed headlines,but midsize (from $100 million up to $1 billion) and small deals (below $100 million) assured a strong foundationfor technology M&A with their faster growth throughout 2014.

• In 2014, 53 deals above $1 billion had value of $148.8 billion, 21% above $122.6 billion for 36 2013 deals. But they fell to 63% of full-year value from 65%.

• Midsize deals grew 36% YOY to $75 billion, increasing to 32% of 2014 value from 29%.

• In 4Q14, deals under $1 billion increased 4% YOY despite a 5% overall decline. n

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Security

Advertising andmarketing technologies

Cloud/SaaS

Smart mobility

IoT

Payment and financial technologies

Big dataSocial networking

Vid

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200 400 600 800 1,000

Advertising andmarketing technologies

Cloud/SaaS

Smart mobility

IoT

Video/online gaming

Payment and financial technologies

Socialnetworking

HealthIT

Security

Big data

Figure 1: A directional view of select 2014 deal-driving trends4Q14 Full-year 2014

Note: average deal value is based on the value of disclosed-value deals, while number of deals includes both disclosed-value and undisclosed-value deals. Bubble size is based on each deal-driving trend’s share of total quarterly and full-year value.

Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 5 January 2015.

Note: percentages may not total 100% due to rounding.


*All values in this report are of disclosed-value deals only and all dollar references are in US$ unless otherwise indicated.

4Q13: $47.2b

4Q14: $44.9b

43%21%27%9%

48%19%25%8%

<$100m $100m–$500m $500m–$1b >$1b

Figure 2: Aggregate value of announced deals by deal size, 4Q14 vs. 4Q13 2014 vs. 2013

2013: $188.2b

2014: $237.6b

63%13%18%6%

65%12%17%5%

Highlights

As equity market volatility surged,corporate technology dealmakers backedaway from big-ticket deals in 4Q14. But full-year 2014 nonetheless set M&A volumeand value records surpassed only in 2000,at the height of the dotcom bubble. Midsizedeals were strong all year, evidencing anunderlying strength in global technologyM&A that is helping to drive technologytransformation across industries.

• In 2014, aggregate value* of $237.6 billion was higher than any year on record except 2000; 4Q14 value was $44.9 billion, down 39% from a record-setting third quarter.

• Full-year volume was 3,512 deals, also higher than any year except 2000 and 4Q14 volume (959) set a fourth consecutive post-dotcom-bubble quarterly record.

• Non-technology and private equity (PE) buyers increased aggregate value dramatically in 4Q14, accounting for 48% of quarterly value (compared with 22% YTD through 3Q14).

• Cross-border (CB) 4Q14 aggregate deal value declined 38% from a record-setting 3Q14 but remained strong, with a 45% share of total quarterly value.

• If volatility calms, we could see a rapid return of big transformative deals. n

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03Solution-buildingdrives blockbuster M&A

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3Global technology M&A | October–December 2014 and year in review

Global technologyM&A update

“Globally, technology corporate development teams took a breather in 4Q14. But I don’t doubt for a minute they’ll be back with transformative deals soon, because megatrend-related innovation is creating more need for true solutions-oriented selling, revealing valuable ‘hidden gems’ inside large organizations, placing more companies in the crosshairs of innovative upstarts and aggressive activists, and increasing all users’ need for state-of-the-art security solutions.”

Jeff LiuGlobal Technology IndustryTransaction Advisory Services LeaderErnst & Young LLP

$114,121m $188,215m $237,610m

2013 20142012

PE Corporate

Average value(Corporate and PE)

Corporate average value

PE average value

$170m

$188m

$430m

$219m

$283m

$805m

$248m

$266m

$421m

Figure 3: Total and average deal values for deals with disclosed values2012–14

Source: EY analysis of The 451 Group Research M&AKnowledgeBase, accessed 5 January 2015.

Solution-building drives blockbuster M&A yearTechnology — and non-technology — companies large and small responded toaccelerating disruptive innovation in 2014 by turning to M&A to keep pace. Theresult (as Figure 3 at left attests) was a blockbuster year for global technologyM&A, despite a fourth-quarter slowdown. Annual deal volume and aggregate valuereached heights only ever surpassed at the peak of the dotcom era, in 2000.

Disruptors — and disrupted — turn to strategic dealmaking

Driving this dramatic rise in technology dealmaking was a critical difference betweencurrent technology disruption and its predecessors. In previous disruptions, customersalways remained responsible for managing technology. But cloud services empowerconsumers and business organizations to hide the technology “stack” (layers of underlyingtechnology products and services enabling the sought-after solution) completely from their view, transferring the responsibility for it — along with the necessary staff expertiseand capital — to cloud service providers. The most important of many resulting implicationsis that consumers and businesses have begun demanding solutions — or insights and“answers” — from technology providers.

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Figure 4: Global technology transaction scorecard (corporate and PE), 4Q14

Deals announced 4Q13 Sequential % change 4Q14

657 883 3% ▲ 34% ▲

214 233 35% ▲ 9% ▲

$39,056 $32,632 –50% ▼ –16% ▼

$183 $140 –63% ▼ –23% ▼

61 76 12% ▲ 25% ▲

20 26 53% ▲ 30% ▲

$8,111 $12,240 45% ▲ 51% ▲

$406 $471 –5% ▼ 16% ▲

Corporate and PE

Number of deals announced

Number of deals with disclosed values

Total value of deals with disclosed values ($m)

Average value of deals with disclosed values ($m)

718 959 4% ▲ 34% ▲

234 259 37% ▲ 11% ▲

$47,167 $44,872 –39% ▼ –5% ▼

$202 $173 –56% ▼ –14% ▼

PE





Corporate





YOY % change


Consequently:

• Technology M&A in 2014 was dominated by strategic transactionsaiming to help buyers bring broader solutions to market, causing corporate deal value to skyrocket.

• Therefore, full-year aggregate value of $237.6 billion was double the value from just two years ago — and higher than any year since 2000.

• Emergence of sense-and-respond e-commerce drove a multitude of deals involving diverse technologies that must be integrated harmoniously to enable sense-and-respond solutions.

• Non-technology companies’ share of 4Q14 aggregate value soared, and they spread dealmaking more evenly across the full technology spectrum in 2014 than in past years (see page 26).

• PE buyers often targeted companies struggling with cloud-induced“stack to solution” transitions (companies we call “in the crosshairs” of disruptive technologies, or of activist investors).

• Even as technology companies strove to broaden solutions for customers, they cored down on the number of businesses they’re in: divestiture deals rose roughly 50% YOY to slightly more than 300. n

*Post-dotcom-bubble (only year 2000 higher)

Up4Q14

Up2014

959 deals= fourth consecutivequarterly record*

3,512 deals= new full-year record*

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• Total volume for the quarter and the year both set new post-dotcom-era records: 959 deals for 4Q14 and 3,512 for the year.

• That M&A volume growth moved in sync with the long-term correlation we’ve observed between technology deal volume and the NASDAQ Composite Index (see page 27). Neither has been higher since their peaks in 2000. n


Figure 5: Global technology transaction scorecard (corporate and PE), 2013 vs. 2014

Deals announced 2013 2014

2,486 3,232 30% ▲

592 800 35% ▲

$129,443 $198,052 53% ▲

$219 $248 13% ▲

224 280 25% ▲

73 94 29% ▲

$58,772 $39,557 –33% ▼

$805 $421 –48% ▼

2,710 3,512 30% ▲

665 894 34% ▲

$188,215 $237,609 26% ▲

$283 $266 –6% ▼

Corporate and PE





PE





Corporate





YOY % change


Corporate deals drive records, but slow in 4Q14

Corporate buyers were behind the post-dotcom-era records set in2014, as well as the 4Q14 falloff.

• Aggregate value of all corporate deals rose 53% YOY for full-year 2014 (Figure 5, page 5) but fell 16% YOY in 4Q14 (Figure 4, page 4).

• But backing out non-technology companies shows corporate technology companies’ YOY value growth was actually 68% for the year and -24% for 4Q14.

• The fourth-quarter falloff is even more stark viewed by quarter. Corporate technology buyers’ aggregate deal value rose 107% YOYthrough the end of 3Q14 — compared with the 24% 4Q14 decline.

• Corporate buyers’ abrupt turnabout was likely due to sudden equity market volatility appearing at the beginning of the fourth quarter that put valuations in doubt. It amplified a seasonal end-of-year slowdown.

• Despite fewer big-ticket deals, corporate volume growth actually accelerated in 4Q14 (34% YOY in 4Q14 versus 30% YOY for the year). It was the sixth consecutive quarterly increase.

Deal value down on quarter, up for year

Down

4Q14

Up2014

–5% YOY

+26% for year

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Disclosedvalue ($m) Deal type

Multiple of TTM EV/ Revenue

Multiple ofTTM EV/EBITDA

Premium offeredAnnounced

Publicis Groupe SA

Thoma Bravo LLC

NetScout Systems, Inc.

Qualcomm Incorporated

Jiangsu Changjiang Electronics Technology Co., Ltd.

Cypress Semiconductor Corporation

Centerbridge Partners L.P.

Vista Equity Partners

Atos SE

CVC Capital Partners Limited

Sapient Corporation

Riverbed Technology, Inc.

Communications business unit of Danaher Corporation

CSR plc

STATS ChipPAC Ltd.

Spansion, Inc.

IPC Systems, Inc.

Advanced Computer Software Group plc

IT outsourcing business assets of Xerox Corporation

Sky Betting and Gaming from Sky plc

$3,700 3 Nov Corporate 2.5x 19.9x 78%

$3,600 15 Dec PE 3.4x 20.2x 8%

$2,600 13 Oct Corporate 3.1x N/A N/A

$2,500 15 Oct Corporate 3.0x 32.4x 76%

$1,971 6 Nov Corporate 1.1x 5.0x 21%

$1,616 1 Dec Corporate 1.4x 22.0x 29%

$1,200 1 Dec PE N/A N/A N/A

$1,135 25 Nov PE 3.3x 23.6x 29%

$1,050 18 Dec Corporate N/A N/A N/A

$942 4 Dec PE 3.0x 11.1x N/A

Buyer Target

Figure 6: Global top 10 deals, 4Q14


International Business Machines Corporation (IBM), LinkedIn Corporation, Microsoft Corporation, Oracle Corporation, Twitter Inc.,Yahoo! Inc. and dozens of advertising agencies, large and small. Publicis Groupe did the most: 10 deals, by our count.

• Enterprise software companies transitioning to SaaS helped drive cloud/SaaS deal volume up about 60% in 2014. We saw nearly $30 billion in cloud/SaaS deal disclosed value.

• SAP’s $8.3 billion deal for Concur Technologies was only one of many SAP transactions in 2014 and 2013 that build a broad SaaS portfolio for business management, including Concur Technologies (travel and expense), SuccessFactors Inc. (human resources), Hybris AG (multichannel and e-commerce), Fieldclass, Inc. (contingent workforce management) and Ariba Inc.(business commerce and collaboration).3

• Oracle also did multiple deals in 2014 to add to its broad SaaS solutions (e.g., MICROS Systems Inc., $5.3 billion) and a series of smaller deals adding to its Oracle Marketing Cloud.

• E-commerce technologies and web businesses were a popular internet target throughout 2014. The stack to solutions theme of 2014 dealmaking was even evident here, when The Priceline Group’s CEO pointed out that “travelers are diners” in the conference call announcing his $2.6 billion deal for OpenTable.4

• Security volume rose to about 50 deals per quarter in 2014 from about 30 in 2013; value rose about 40% to more than $10 billion.Many enterprise customers are demanding comprehensive security solutions, driving increased dealmaking as suppliers work to extend the breadth of their offerings. n

Strategic solution-building deals seek scale and breadth

Strategic corporate deals often sought greater scale, broadercustomer solutions or both. The business opportunities involvedranged from consumer travel to business spend management tomultiple sense-and-respond-related opportunities to messagingplatforms that could encompass all forms of human communication.And that’s before mentioning the sudden emergence of IoT as adeal-driving phenomenon.

• The purchase price of the year’s largest deal by dollar value was the Facebook-WhatsApp acquisition in 1Q14 (Figure 7, page 7). But since then, mobile messaging platforms have been “trending,”1

given rapid global growth and investors’ realization they could become next-generation platforms for widespread commerce and communications solutions. It was the largest of many mobile messaging app targets in 2014.

• Advertising and marketing technologies saw rising YOY volume and value (about 60% each) in 2014 — and the largest deal of 4Q14. One key reason is that technology and non-tech firms are racing to stack together end-to-end solutions that bridge the gap between prospect acquisition and lead nurturing.2

• Besides Publicis Groupe in 4Q14, notable advertising and marketing technology buyers throughout the year included Alliance Data Systems Inc., AOL, Inc., Facebook, Inc., Google Inc.,

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Disclosedvalue ($m) Deal type

Multiple of TTM EV/ RevenueAnnounced

Facebook, Inc.

SAP SE

GTECH S.p.A.

Oracle Corporation

Scientific Games Corporation

Amaya Gaming Group Inc.


Publicis Groupe SA

Thoma Bravo LLC

Zillow, Inc.

WhatsApp Inc

Concur Technologies, Inc.

International Game Technology, Inc.

MICROS Systems, Inc.

Bally Technologies, Inc.

Rational Group Ltd. (PokerStars.com)

TIBCO Software Inc.

Sapient Corporation


Trulia, Inc.

$19,000 19 Feb Corporate N/A N/A N/A

$8,300 18 Sep Corporate 12.4x 2,214.5x 29%

$6,498 16 Jul Corporate 2.8x 10.1x 17%

$5,300 23 Jun Corporate 3.5x 18.1x 69%

$5,149 1 Aug Corporate 3.7x 14.7x 27%

$4,900 13 Jun Corporate 4.3x 11.1x N/A

$4,300 29 Sep PE 3.9x 19.5x 15%

$3,700 3 Nov Corporate 2.5x 19.9x 78%

$3,600 15 Dec PE 3.4x 20.2x 8%

$3,500 28 Jul Corporate 20.1x N/A 48%

Buyer Target

Figure 7: Global top 10 deals, 2014


Sense-and-respond solutions drive wide range of technology deals

Development of sense-and-respond solutions (comprised ofomnipresent digital environments that sense and respond to humanactivity and interests) helped drive rapid growth in volume andvalue of deals targeting technologies for advertising and marketing,financial services and payments, IoT and security. Sense-and-respond solutions require all these technologies to integrateharmoniously. We first noted this trend as an overarchingdealmaking driver in 2Q14,5 but it was an important driver all yearand will likely remain so in 2015.

• Financial services and payment technologies rose roughly 50% in volume YOY and value more than doubled to nearly $25 billion — including seven deals above $1 billion and an eighth that just missed that mark.

• Financial technologies were a popular target for PE firms. They bought more than two dozen targets, including three of the sevendeals above $1 billion.

• IT services companies were popular sense-and-respond targets (see IT services snapshot, page 21).

• IoT targets drove deals because sensors that communicate information about your devices, your environment or — in the case of fitness and health care IT (HIT) — your body is crucial to sense-and-respond solutions. In the “stack to solution” context, think of IoT technologies as extending the information technologystack to … everything!

Premium offered

Multiple ofTTM EV/EBITDA

• We saw nearly 60 IoT-targeted deals and more than $13 billion in deal value for the year. We have no historical comparison for IoT because deals burst on the scene in late 2013. We only started categorizing IoT deals in 2014.

• In 4Q14, the Qualcomm-CSR and Cypress-Spansion (Figure 6, page 6) involved semiconductor IoT targets.

• Google’s $3.2 billion 1Q14 deal for Nest Labs, Inc. exemplifies sense-and-respond IoT in home automation. After acquiring Nest,Google made multiple related acquisitions.

• A growing number of small and undisclosed-value deals targeting recommendation technologies, image and speech recognition technologies and artificial intelligence technologies also play into the sense-and-respond vision. n

Corporate tech buyers pause from 3Q14 high

Down

4Q14 –50%

4Q14 private equity soars

48%*of total tech deal value

Up4Q14

*PE + non-tech buyers

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Corporate buyers find “hidden gems” amongtechnology divestitures

Divestitures increased markedly during 2014 in both volume andvalue. Of note, many divestiture deals not only brought value forthe seller, but emerged as strategically important to the buyer —showing that one company’s non-core business often can be a“hidden gem” for another.

• Divestitures increased to more than 300 in 2014 from about 200 in 2013.

• Six divestitures were valued above $1 billion; only two achieved that level in 2013.

• Lenovo Group Ltd. did two of the six in 1Q14, acquiring the Motorola handset business from Google ($2.9 billion) and IBM’s x86 server business ($2.3 billion).

• Two more occurred in 4Q14, for Danaher’s communications business and Xerox’s IT outsourcing business (Figure 6, page 6).

• The others were Zebra Technologies Corporation’s $3.5 billion deal for the Enterprise business of Motorola Solutions, Inc. (an IoT-related deal) and Cerner Corporation’s $1.3 billion HIT deal for Siemens AG’s Siemens Health Services business.

• One deal not counted in the six came with a reverse twist: IBM “sold” its semiconductor business to GLOBALFOUNDRIES Inc. butwill pay GLOBALFOUNDRIES $1.5 billion over the next three years.GLOBALFOUNDRIES becomes IBM’s exclusive server chip supplierfor 22-nanometer and smaller-scale devices. With this deal and the 1Q14 x86 server divestiture, IBM has reduced its hardware footprint in 2014.

• As usual, 4Q14 saw a variety of divestitures, as companies reorganized and refocused. BlackBerry Ltd. sold data center assets, Dell sold an outsourcing business, AT&T sold its “Watson” speech recognition technology and Microsoft’s pending sale of MixRadio. These deals had undisclosed values. n


PE dealmaking helps accelerate business strategy transformations

PE firms’ 280 deals in 2014 hit on the full range of diverse deal-driving trends, with some interesting areas of concentration.But their largest deals often targeted companies disrupted bycustomers’ sudden acceleration in cloud adoption beginning abouttwo years ago. We think of these companies as “in the crosshairs”of disruptive technologies and, as a result, of activist investors.They typically seek to accelerate their transformations by goingprivate, following the example set by Dell Inc.6

• Ten PE deals topped $1 billion in 2014, including 2 deals that made the year’s top 10 to take private TIBCO Software and Riverbed Technology (Figure 7, page 7).

• Financial services and payments technologies were targeted in more than two dozen PE deals with aggregate value of more than $9 billion — or about 23% of full-year PE aggregate value ($39.6 billion).

• PE dealmaking value surged in 4Q14. It jumped to $12.2 billion, up 51% for the year and 34% above its average for the first three quarters, to capture a 27% share of the 4Q14 total.

• But PE value was down for the year (-33%). It would have climbed 15% YOY if not for the one “megadeal” to take Dell private in 2013.

• Together, PE and non-technology buyers accounted for 48% ($21.6 billion) of the 4Q14 aggregate value of $44.9 billion, and 27% ($63.4 billion) of the full-year 2014 total.

• Other targets popular with PE buyers included cloud/SaaS (everykind of industry-specific software you can imagine), advertising and marketing, big data analytics, HIT, IoT, network infrastructureand telematics.

• More than a dozen deals targeted education technologies in the internet and software sectors, including one that rose above $1 billion: Renaissance Learning Inc. ($1.1 billion). Another, for Skillsoft Ltd., was likely higher, but terms were not disclosed.7 n

Midsize tech deals tell a new story

Up4Q14

+3% value

Up2014

+36% value

Deals from US$100m–US$1b: US$21.4b

Tech cross-border M&A remains strong

45%of total deal value

Up4Q14 CB

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Look ahead


Robust dealmaking ahead2014 was a blockbuster year for technology M&A. But unlike 2000, it was nobubble. Despite the occasional “moonshot” from a handful of deep-pocketedbuyers, the vast majority of deals were measured in reality-based multiples of good-old-fashioned revenue, profit or cash flow.

So while 2015 may — or may not — hit the same lofty highs as 2014, we fullyexpect another robust year of technology M&A in response to the transformationssweeping technology and rippling through all industries of the global economy.

Consequently, technology executives would be wise to ask themselves:

• Are we positioned to offer customers true solutions, or insights and “answers,” as opposed to just a point offering in the overall technology stack?

• Is there a “hidden gem” among our business units and other departments with the potential to drive greater value?

• Has disruptive technology placed our organization “in the crosshairs” of some upstart companies or of activist investors?

• Are we doing all we can to provide comprehensive security in our offerings?

Full-year 2014 aggregate deal valuehit $237.6 billion; only the year 2000was higher.

$237.6b

“Unlike during the dotcom bubble, today’s disruptive technology businessesare able to create value rapidly and with real revenue and cash flow growth — not simply eyeballs, content and site visits. That’s a key reason whycurrent high levels of M&A are sustainable.”Jeff LiuGlobal Technology IndustryTransaction Advisory Services LeaderEY

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Appendices12 Regional snapshot

12 Americas

14 Asia-Pacific and Japan

16 EMEA

18 Sector snapshot

18 Communications equipment

19 Computers, peripherals and electronics

20 Internet

21 IT services

22 Semiconductors

23 Software/SaaS

24 Cross-border value

26 Transaction value flow

27 Historical view of technology M&A activity and NASDAQ Composite Index

28 Cash chart


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Regional snapshot

AmericasAmericas technology M&A growth lagged other regions, but Americas buyers still captured more than two-thirds of 2014global volume and aggregate value. They acquired even higher shares of strategic growth technologies, including cloud/SaaS,smart mobility, big data analytics and IoT. Aggregate value declined YOY in 4Q14, despite the fact that IoT dealmakinggained steam as US companies focused on the potential of this latest big growth area.

*Ernst & Young Capital Advisors, LLC is a broker-dealer affiliate of Ernst & Young LLPand a member of FINRA (www.finra.org) providing sector-specific advice on M&A, capital markets and capital restructuring transactions.


• Americas buyers increased aggregate value only 4% YOY in 2014, while other regions more than doubled. But Americas companies still bought 7 of the top 10 2014 deals and 35 of the 53 deals at or above $1 billion — including the largest, Facebook-WhatsApp.

• Cloud/SaaS remained a dominant “background radiation.” It appeared in nearly 700 Americas deals (about 80% of all cloud/SaaS deals), including Oracle-MICROS Systems, the region’s second-largest of the year (Figure 8, page 13).

• The global IoT trend gathered strength during the year. US buyers led the way with about 60% of 2014 deals, including Google-Nest Labs ($3.2 billion) early in the year. But 4Q14 saw more than 40% of those deals, including Qualcomm-CSR and Cypress-Spansion.

• Many other transactions focused on advertising and marketing technology, HIT, security and financial services and payments.

• PE firms took established companies private throughout the year, at least partly to help accelerate transformations for companies caught in the crosshairs of disruptive technologies. In 4Q14, network-optimization specialist Riverbed Technology went private; 3Q14 included enterprise software company TIBCO(Figures 8 and 9, page 13).

• Americas buyers captured 90% of disclosed value of financial systems and payment-processing technology targets, including the4Q14 deal for financial-trading technology company IPC Systems.

• In part due to opportunities created by health care reform, US buyers also accounted for more than 90% of 2014 global HIT deal value.

• More than three-quarters of 2014 security deal value went to Americas buyers, including the second-largest deal of 4Q14, for Danaher’s communications business (which includes cyber security tools).

• Canadian buyers focused primarily on cloud/SaaS, mobility, and advertising and marketing technologies in their 161 deals for 2014. But the largest deal with a Canadian buyer was the one forPokerStars.com, which envisions accelerating the re-entry into the US of the world’s largest online poker brand.1 n

“As the IoT trend gathers strength, US companies are increasingly using strategic transactions to position themselves for hugeanticipated growth in connected devices andrelated software and services.”

David HedleyUS Technology M&A LeaderErnst & Young Capital Advisors, LLC*

Americas buyers captured 68% ofglobal volume and 67% of global value.

68%

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Figure 8: Top five Americas deals (corporate and PE), 2014

Figure 9: Top five Americas deals (corporate and PE), 4Q14

Figure 10: Americas transactions scorecard, 4Q14

Disclosed Premium Buyer Target value ($m) Announced Deal type offered

Facebook, Inc.

Oracle Corporation




WhatsApp Inc




TIBCO Software Inc.

$19,000 19 Feb Corporate N/A

$5,300 23 Jun Corporate 69%

$5,149 1 Aug Corporate 27%

$4,900 13 Jun Corporate N/A

$4,300 29 Sep PE 15%


Thoma Bravo LLC




Centerbridge Partners L.P.


Communications business unit of DanaherCorporation

CSR plc

Spansion, Inc.

IPC Systems, Inc.

$3,600 15 Dec PE 8%

$2,600 13 Oct Corporate N/A

$2,500 15 Oct Corporate 76%

$1,616 1 Dec Corporate 29%

$1,200 1 Dec PE N/A


493 559 –1% ▼ 13% ▲

147 127 32% ▲ –14% ▼

$25,613 $19,050 –46% ▼ –26% ▼

$174 $150 –59% ▼ –14% ▼

51 52 4% ▲ 2% ▲

15 13 30% ▲ –13% ▼

$7,875 $8,331 4% ▲ 6% ▲

$525 $641 –20% ▼ 22% ▲

Corporate and PE





544 611 0% ▼ 12% ▲

162 140 32% ▲ –14% ▼

$33,488 $27,381 –37% ▼ –18% ▼

$207 $196 –52% ▼ –5% ▼

PE





Corporate





YOY % change

Note: the US had 93% of Americas deal volume and 95% of aggregate value in 2014. In 4Q14, the US had 91% of Americas volume and 97% of value.



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Chinese dealmakers led a second year of surging APJ volume and value in 2014 as they sought growth through domestic andglobal acquisitions. Many deals focused on mobility, gaming or expansion of the country’s semiconductor industry. While therest of APJ kept pace with China’s surge, dealmaking drivers were more diverse. Many deals targeted cloud/SaaS, advertisingand marketing, payments, security and social networking technologies. Although 4Q14 value declined YOY, volume soared141% on growth from Australia, India and Singapore.

• Global expansion appeared to be a key motivator for China/HK buyers, who led the region’s full-year aggregate value growth. Though most of their 67 deals were in-border, the largest looked beyond — such as Lenovo’s Motorola handset and IBM server deals, the top two for 2014 (Figure 11, page 15). China’s aggregate value increased 121% to $15.5 billion in full-year deal value (53% of total APJ 2014 value of $29.4 billion).

• Mobility remained the primary deal driver across the rest of the region, as it was last year. Even omitting China, the rest of APJ increased value 104% in 2014.

• The top two 4Q14 deals were also CB deals with Chinese buyers, seen as part of the country’s ongoing effort to expand its semiconductor sector.1

• China’s top mobile gaming transaction (of many) was the deal to take Giant Interactive private.

• China’s internet companies were active buyers (e.g., Alibaba-AutoNavi). But most of their deals were minority investments and thus not included in our data.

• Japanese buyers did mostly CB deals, often targeting high-growthUS companies. The country’s largest deal of the year was Rakuten’s $1 billion deal for US e-commerce company eBates Inc.

• Cloud/SaaS deals, however, were the primary driver behind Australia’s annual volume, which more than doubled to 86 deals (the region’s highest). Australian dealmaking surged in all industries in 2014, spurred by that country’s growing corporate confidence.2

• In 4Q14, cloud/SaaS and advertising and marketing technologies were major targets in Australia, India and Singapore. The three countries combined for 61 deals in the quarter, more than triple their 4Q13 volume (17 deals).

• Additionally, Australia also saw multiple security and gaming deals in 2014, while India saw several social networking deals.

• A 4Q14 cloud/SaaS deal was India’s largest of the year (Tata-CMC, Figure 12, page 15)— the merger is driven by a desire to have a better common go-to-market strategy and rationalize costs. n


Regional snapshot

Asia-Pacific* and Japan (APJ)

“The rise in APJ transactions reflects the increasing strength of the region’s technology companies and their search for continued growth through international expansion.”

Ben KwanTransaction Advisory Services Technology, Media & Telecom (TMT) Market Segment LeaderEY Greater China

APJ deal value rose 113% in 2014 to$29.4 billion.

$29.4b

*Asia-Pacific includes India.

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Figure 11: Top five Asia-Pacific and Japan deals (corporate and PE), 2014

Figure 13: Asia-Pacific and Japan transactions scorecard, 4Q14


Lenovo Group Ltd.

Lenovo Group Ltd.

Jiangsu Changjiang ElectronicsTechnology Co., Ltd.

Alibaba Group Holding Ltd.

Giant Investment Ltd.

Smartphone business unit of MotorolaMobility Holdings, Inc.

x86 server business unit of IBM Corporation

STATS ChipPAC Ltd.

AutoNavi Holdings Ltd.

Giant Interactive Group Inc.

$2,910 29 Jan Corporate N/A


$1,971 6 Nov Corporate 21%

$1,580 11 Apr Corporate 32%

$1,521 17 Mar PE 6%



Bluestar Elkem Investment Co. Ltd.

Vocus Communications Ltd.

Tata Consultancy Services Ltd.

Nojima Corporation

STATS ChipPAC Ltd.

REC Solar ASA

Amcom Telecommunications Ltd.

CMC Ltd.

ITX Corporation


$644 24 Nov Corporate 25%

$534 17 Dec Corporate 25%

$512 16 Oct Corporate 6%

$439 18 Nov Corporate N/A

Figure 12: Top five Asia-Pacific and Japan deals (corporate and PE), 4Q14


45 108 24% ▲ 140% ▲

26 48 118% ▲ 85% ▲

$6,602 $5,699 20% ▲ –14% ▼

$254 $119 –45% ▼ –53% ▼

1 3 –40% ▼ 200% ▲

1 2 0% — 100% ▲

$24 $33 –3% ▼ 38% ▲

$24 $16 –6% ▼ –33% ▼

Corporate and PE





46 111 21% ▲ 141% ▲

27 50 108% ▲ 85% ▲

$6,625 $5,732 19% ▲ –13% ▼

$245 $115 –43% ▼ –53% ▼

PE





Corporate





YOY % change



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• Facing sluggish economic growth in Europe, EMEA companies used big-ticket US acquisitions to accelerate expansion by gainingaccess to US firms’ technology, customers and faster US economicgrowth. US targets were only 22% of EMEA 2014 volume of 779 deals, but 66% of full-year value of $47.9 billion — including all top five deals shown on page 31. Seven of the region’s 10 deals above $1 billion had US targets.

• UK buyers accounted for more than a third of deals targeting US companies but only one above $1 billion: Micro Focus International plc’s$1.2 billion deal for AttachMate Group earlier in the year. German, French, Swiss and Italian companies also did big-ticket US-targeted deals.

• Cloud/SaaS was a focus of roughly 18% of EMEA deals, including the region’s largest: SAP-Concur, the latest in a string of SaaS acquisitions by SAP. Other deals that aim to accelerate cloud/SaaS transitions included the two 4Q14 PE deals shown on page 21, for Dutch enterprise business software supplier Exact Holding and Norwegian systems and services company EVRY ASA.

• Several IoT-related deals targeted telematics technology. But the largest was the one in Figure 14 (page 17) for US sensor maker Measurement Specialties.

• The shift to digital advertising factored into about 90 EMEA deals,the largest of which was by France’s Publicis Groupe for US-based Sapient. The advertising conglomerate aims to accelerate its digitaltransformation after ending its merger with Omnicom Group.1

• Several large French IT services deals included two by Atos involving well-known names: in 4Q14, Atos expanded its US footprint with the IT outsourcing business of Xerox. Earlier in the year, Atos acquired server supplier Bull SAS, once one of Europe’sbiggest computer manufacturers.

• Consolidation in the casino/lottery gaming technology sector drove Italy’s largest transaction, for US-based International Game Technology.

• EMEA volume increased 43% for the year and 85% YOY in 4Q14. n

EMEA aggregate value growth more than doubled in 2014, outpacing other regions, as EMEA buyers sought to drive growthby acquiring US companies. Cloud/SaaS and mobility were major deal-driving trends, but also prominent were advertisingand marketing technology, financial systems and several large IoT deals. In 4Q14, volume increased faster than in any other2014 quarter. And while aggregate value growth slowed, it was still 67% YOY — making EMEA the only region to increasevalue on a YOY basis in every quarter.


Regional snapshot

Europe, the Middle East and Africa (EMEA)

“By focusing on US acquisitions, EMEA companies are seeking opportunities to take advantage of that country’s faster economic growth.”

Simon PearsonTMT Corporate Finance Leader UKIEY UKI

EMEA aggregate value leapt 133% in2014 to $47.9 billion.

133%

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Figure 14: Top five EMEA deals (corporate and PE), 2014

Figure 15: Top five EMEA deals (corporate and PE), 4Q14

Figure 16: EMEA transactions scorecard, 4Q14


SAP SE

GTECH S.p.A.

Publicis Groupe SA

Infineon Technologies AG

TE Connectivity Ltd.



Sapient Corporation

International Rectifier Corporation

Measurement Specialties, Inc.

$8,300 18 Sep Corporate 29%

$6,498 16 Jul Corporate 17%





Publicis Groupe SA

Atos SE

CVC Capital Partners Limited

Eiger Acquisition BV

Funds advised by Apax Partners

Sapient Corporation

IT outsourcing business assets of XeroxCorporation

Sky Betting and Gaming from Sky plc

Exact Holding NV

EVRY ASA


$1,050 18 Dec Corporate N/A

$942 4 Dec PE N/A

$922 9 Oct PE 11%

$606 8 Dec PE -10%


119 216 5% ▲ 82% ▲

41 58 7% ▲ 41% ▲

$6,841 $7,883 –68% ▼ 15% ▲

$167 $136 –71% ▼ –19% ▼

9 21 62% ▲ 133% ▲

4 11 120% ▲ 175% ▲

$212 $3,876 795% ▲ 1,728% ▲

$53 $352 305% ▲ 564% ▲

Corporate and PE





128 237 8% ▲ 85% ▲

45 69 17% ▲ 53% ▲

$7,053 $11,759 –54% ▼ 67% ▲

$157 $170 –60% ▼ 8% ▲

PE





Corporate





YOY % change



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Smartphones, network performance optimization and IoT drove an otherwise sluggish 2014 CE deals market, which lagged behind global volume growth and actually declined in aggregate value. But 4Q14 saw a value spike: it generated more than half of full-year aggregate value. The outlook for 2015 CE M&A is difficult to predict: with intensifying competition and slowing customer investment, it could be another slow year — or, pressure to consolidate could generate big-ticket transactions.

• The largest of more than a dozen 2014 CE IoT deals rounded out the sector’s top five deals. IoT deals drove about $1.5 billion, or 11%, of full-year CE value. Many of the deals targeted location-tracking technologies (such as for automotive fleets) or wireless infrastructure for machine-to-machine (M2M) networks.

• In all, 122 deals targeted CE companies in 2014 (3% of total volume). Only semiconductors had fewer deals. Targets had $13.8 billion in disclosed value, down 31% from 2013. CE buyers spent $3 billion, down 68% (Figure 25, page 26). Both buyer and seller values were the smallest of any sector.

• But 58%, or $8.1 billion of the full-year CE target aggregate value, came in the 4Q14 surge that yielded three of the top five deals seen below. n

• The smart mobility trends that drove CE growth in recent years caught up with the sector, as global smartphone shipment growthfell from 44% YOY in 2012 to a forecasted 12% YOY in 2015.1

Lenovo’s acquisition of Motorola from Google (see chart below) boosts its global growth prospects as new smartphone entrants increased competition in its domestic Chinese market.2

• Another of the year’s top five deals heralded the end of — or at least a significant decline in — smartphone patent litigation. Nortel Networks’ patent portfolio was sold by the Rockstar Consortium, which acquired it for $4.5 billion in 2011, to a patent clearinghouse (immediately ending several lawsuits).3

• Carriers’ slowing capital investments in mobile network upgrades held back CE all year.4 So network equipment vendors did many small deals to supply carriers with improved service and security —from indoor wireless antennas at the network’s edge to software-defined networking in the cloud.

• Two 4Q14 deals along those lines that made it into the top five for the year were the acquisitions of Riverbed Technology and Danaher’s communications business (see below). Both involve network performance optimization; Danaher includes cyber security technology.

Sector snapshot

Communications equipment


Thoma Bravo LLC

Lenovo Group Ltd.


RPX Corporation

Michelin Group


Smartphone business of Motorola MobilityHoldings, Inc.

Communications business unit of DanaherCorporation

4,000 patent assets of Rockstar Consortium

Sascar Tecnologia Automotiva SA

$3,600 15 Dec PE 8%


$2,600 13 Oct Corporate N/A

$900 23 Dec Corporate N/A

$592 9 Jun Corporate N/A


Figure 17: Top five communications equipment deals, 2014


CE sector targets posted only $13.8 billion in 2014 aggregatevalue, -31% YOY.

$13.8b

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GTECH S.p.A.


Zebra Technologies Corporation

Google Inc.

Apple Inc.



Enterprise business unit of MotorolaSolutions, Inc.

Nest Labs, Inc.

Beats Electronics LLC



$3,450 15 Apr Corporate N/A


$3,000* 28 May Corporate N/A

*Deal value comprises $2.6b cash and $400m to vest over time, Apple Inc. press release 28 May 2014.


Real-money online and mobile gaming, IoT and security technologies, plus some spinoffs and consolidation, were the primarydrivers behind CPE dealmaking in 2014. Many deals also targeted storage, 3D, wearables and mobile apps. But it was a yearof below-average growth in CPE volume and a fall in CPE-targeted aggregate value. And while 4Q14 saw the same diversity ofdeal drivers, it had a significant slowdown in aggregate value. For 2015, we expect a similar mix of ongoing spinoffs andconsolidation and many small deals targeting innovative, fast-growing new technologies.

• Also during 2014, IBM divested its x86 server business to Lenovofor $2.3 billion, Sony divested its PC business for an undisclosed amount and Hewlett-Packard Company announced its intention toseparate its enterprise and PC businesses.

• In 4Q14, CPE deal value was only $2 billion, or 5% of the full-year total.

• There were 277 CPE-targeted deals in 2014, up only 18% YOY. They had disclosed value of $41.4 billion, down 17% from 2013. CPE buyers, however, also spent $41.4 billion, but that was 121%more than in 2013. n

• Besides a large and ongoing impact from the 2008 global recession, the casino and lottery industry is also dealing with growth of online and mobile real-money competition.1 Those wereamong the technologies targeted in the $16.2 billion worth of 2014 CPE-targeted gaming deals, which included the top two deals shown in the chart below.

• Potentially broadening use of virtual reality technology motivatedFacebook’s $2 billion deal for Oculus VR, Inc., which also was included in the 2014 gaming value tally.

• IoT technologies for home automation, various embedded-sensorelectronics (such as for 3D motion tracking) and wearable healthand fitness devices drove roughly 20 CPE deals. They included the third- and fourth-largest deals by dollar value shown below.

• Security dealmakers targeted CPE technologies for video surveillance (home, business and military) throughout the year, along with physical access control systems and identity management/authentication. We saw more than two dozen such deals in 2014, with nearly $2 billion in disclosed value.

• Storage deals focused on flash technology or cloud storage, backup and recovery systems and software.

Sector snapshot

Computers, peripherals and electronics

Figure 18: Top five computers, peripherals and electronics deals, 2014


Though target value fell, CPE buyersspent 121% more YOY in 2014: $41.4 billion.

121%

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Internet companies expanding into new businesses, combined with advertising and marketing, gaming and social networkingdeals, drove M&A values sky-high in 2014, from both buyer and seller perspectives. In 4Q14, internet dealmaking saw moreof the same, though with lower aggregate value and a bit more deal diversity. As internet competition intensifies, 2015 maysee dealmaking climb higher still.

• The top deal of 4Q14 was also a gaming deal, as British Sky Broadcasting Group PLC divested Skybet.com for $942 million to a PE buyer.

• E-commerce deals were done throughout the year, including 4Q14. The deals below for Trulia (real estate), OpenTable (diners) and Cars.com (you guessed it — cars!) are the largest of many.

• In all, 474 deals targeted internet companies in 2014 (13% of total volume). n

• New business exploration (including the occasional “moonshot”)drove big-ticket deals throughout the year. Think Facebook’s WhatsApp and Oculus deals (messaging and virtual reality), Google’s Nest Labs deal (IoT), and Amazon’s Twitch Interactive deal (streaming live videogame play).

• Consequently, YOY aggregate value growth rates for buyers and targets were far higher than for any other sector. Internet-targeted deals had $32 billion in disclosed value, up 219% over 2013. Internet buyers spent $45.5 billion, up 327% over 2013(Figure 25, page 26).

• Social networking technologies drove nearly 90 internet deals in 2014, with about $4.2 billion in disclosed value — 83% of all valuefor social targets ($5 billion). The largest 2014 deal by dollar valuewas Mail.ru Group’s $1.5 billion deal for the portion it did not already own of VKontakte Ltd., Russia’s largest social network.

• Advertising and marketing drove nearly 70 deals and about $3.1 billion in disclosed value. Many deals had a mobile component, and some included big data analytics or payments technologies. The largest of the year with an internet target was the Alliance Data Systems-Conversant deal shown below.

• While gaming drove only about 40 deals, targets often came with high values. Deals totaled $9.8 billion in full-year disclosed value and included the largest internet-targeted deal of the year (for Pokerstars.com).

Sector snapshot

Internet

Figure 19: Top five internet deals, 2014



Zillow, Inc.

The Priceline Group Inc.

Alliance Data Systems Corporation

Gannett Co., Inc.


Trulia, Inc.

OpenTable, Inc.

Conversant, Inc.

Cars.com

$4,900 13 Jun Corporate N/A




$1,800 5 Aug Corporate N/A



Internet-targeted deal value soared219% to $32 billion in 2014.

219%

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The emerging sense-and-respond economy drove many of the highest-value IT services deals of 2014, including in 4Q14.Topping the list were deals targeting financial services, payments and advertising and marketing technologies, followed bysecurity, big data analytics, smart mobility, cloud/SaaS and HIT. We expect a lot more of the same in 2015, as thedevelopment of sense-and-respond environments goes into full swing.

• Many small and a handful of larger deals sought growth through geographic expansion or consolidation. For example, two French IT services companies consolidated in 2Q14 when Sopra Group SA acquired Groupe Steria SCA ($1 billion). And in 4Q14, France’s Atos sought US growth in a $1.1 billion deal for Xerox’s outsourcing business.

• In all, 891 deals targeted IT services in 2014 (25% of total volume). Targets had $30.5 billion in disclosed value, up 82% over 2013. IT services buyers spent $22.2 billion, up 79% (Figure 25, page 26). n

• Often, targets integrated multiple capabilities. Technology companies sought to stack together solutions that, for example, provide advertising and marketing technologies in the cloud that lead to mobile e-commerce payments and then to aggregated data for subsequent (or real time) analysis.

• The largest IT services deal was also the largest of 4Q14 (see chart below) and was for Sapient, which provides online social and mobile advertising and marketing services and analytics. In all, $5.3 billion of the year’s $11.5 billion in advertising and marketing deals targeted IT services companies, more than in any other sector.

• The next three deals by dollar value targeted different payment or financial services technologies. IT services targets accounted for $12 billion of the $24.6 billion worth of deals we saw for such technologies.

• An HIT deal rounded out the top five. Though that one deal delivered nearly all IT services HIT disclosed value for the year ($1.6 billion), more than two dozen sector companies were HIT targets.

• About five dozen IT services targets were security companies — nearly 30% of all security deals we saw in 2014. They were small:aggregate disclosed value was only $905 million.

Sector snapshot

IT services

Figure 20: Top five IT services deals, 2014


Publicis Groupe SA

FleetCor Technologies, Inc.

Advent International/ATP/Bain Capital

KKR/Sedgwick Claims ManagementServices management

Cerner Corporation

Sapient Corporation

Comdata, Inc.

Nets Holding A/S

Management buyout of Sedgwick ClaimsManagement Services, Inc.

Health information technology business unitof Siemens Health Services from Siemens AG



$3,143 24 Mar PE N/A

$2,400 27 Jan PE N/A




IT services-targeted deal value rose82% YOY to $30.5 billion.

$30.5b

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Sector consolidation and the pursuit of growth in suddenly hot IoT technologies were the primary drivers of 2014semiconductor M&A volume growth, which outpaced the global average for the year. But aggregate value growth lagged. In4Q14, IoT transactions drove an uptick in volume and value: the last quarter took in 28% of annual volume and 31% ofannual value. We expect both these trends to continue driving big-ticket deals through 2015.

• High-frequency wireless chips used in communications infrastructure, military and aerospace applications led to the year’s third-largest deal, for Hittite Microwave.

• In all, there were 118 semiconductor deals in 2014, 55% more than in 2013. As noted above, disclosed value of sector targets increased only 15%, which was less than the global 26% increase. Sector buyers spent $23.3 billion, plus 11% over 2013. n

• Ongoing semiconductor consolidation is being driven by the increasing cost and risk of developing next-generation chips. Companies sought to increase market share, product breadth and economies of scale in deals such as Infineon-International Rectifier, the largest sector deal of the year. The German buyer gained greater access to the US market as part of the deal.

• The consolidation trend grew more strongly than suggested by the 15% YOY increase in semiconductor-targeted disclosed value to $25.1 billion in 2014. That’s because only two very large 2013 deals combined for $15.9 billion (73% of the year’s aggregate value) and only three deals topped $1 billion. But there were seven above that level in 2014, with the largest topping out at $3 billion.

• The growth potential of IoT drove many deals in the sector. In 4Q14, Qualcomm gained connectivity technology used in cars and connected devices in the year’s second-largest deal. Again in 4Q14, the growing automotive semiconductor market also was a focus of the year’s fifth-largest deal, as Cypress and Spansion did a deal to consolidate their memory chip technologies used in cars, medical devices and mobile devices.

• China’s continuing effort to expand its semiconductor industry ledto the year’s fourth-largest deal, a 4Q14 consolidation of two chip packaging and testing companies.1

Figure 21: Top five semiconductor deals, 2014


Infineon Technologies AG


Analog Devices, Inc.



International Rectifier Corporation

CSR plc

Hittite Microwave Corporation

STATS ChipPAC Ltd.

Spansion, Inc.


$2,500 15 Oct Corporate 76%



$1,616 1 Dec Corporate 29%



Sector snapshot

Semiconductors

Semiconductor deal volume rose 55% YOY, faster than the 30% global average.

55%

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The global economy’s progression toward “everything as a service” drove the software/SaaS sector to more than twice theaggregate value of any other sector in 2014. Naturally, cloud/SaaS deals were the biggest driver — but among many. In4Q14, aggregate value slowed but volume held steady. We anticipate these trends can only accelerate in 2015, as long asmacroeconomic and geopolitical conditions remain stable.

• Security breaches in the news helped drive more than 100 security deals in the sector, including tools for corporate cybersecurity and regulatory compliance.

• Big data analytics deals targeted both general software, such as Hadoop and NoSQL databases, and a multitude of industry-specific analytics, especially for advertising and marketing.

• Yahoo’s $640 million 4Q14 deal for BrightRoll was the sector’s largest advertising and marketing deal of the year.

• 4Q14 slowed: the last quarter had only 14% of full-year sector value.

• In all, 1,630 deals targeted software/SaaS in 2014, up 31% YOY. They had $90.2 billion in disclosed value (+32% YOY), which was 38% of all 2014 aggregate value. Sector buyers spent only $38.8 billion (+22% YOY). n

• Cloud/SaaS factored into 47% of sector deals, up from 39% in 2013 and 32% in 2012.1 Those deals totaled more than $24 billionin full-year aggregate value (about 85% of all cloud/SaaS disclosedvalue) and included two of the year’s top five transactions: the SAP-Concur and Oracle-MICROS deals, shown below.

• Fast-spreading mobile messaging apps drove software/SaaS dealsto nearly 90% of the smart mobility deal value we saw for the year (more than $32 billion). Facebook-WhatsApp (shown below) was the largest.

• Other fast-growing trends that drove up sector volume and value included big data analytics (67% of 2014 disclosed value was in software/SaaS targets), financial services and payments (51%), security (48%) and advertising and marketing (27%).

• In 2014, PE firms took private several sector companies “in the crosshairs” of innovative technologies or activist investors. The underlying reason, it appears, was to enable the companies to execute business strategy transitions with greater flexibility. In 4Q14, Advanced Computer Software Group went private in a $1.1 billion deal; TIBCO went private earlier in 2014 (noted below).

• Opportunity emerging from changes in the US health care industry drove the year’s fifth-largest sector deal (see below).

Sector snapshot

Software/SaaS

Figure 22: Top five software/SaaS deals, 2014


Facebook, Inc.

SAP SE

Oracle Corporation


Cognizant Technology SolutionsCorporation

WhatsApp Inc.



TIBCO Software Inc.

TriZetto Corporation

$19,000 19 Feb Corporate N/A



$4,300 29 Sep PE 15%

$2,700 15 Sep Corporate N/A



Software/SaaS-targeted value of$90.2 billion was twice that of anyother sector.

$90.2b

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4Q14

Note: percentages may not total to 100% due to rounding.


A voracious focus on acquiring US targets was the big CB storyof 2014. The trend peaked in 3Q14 but was prevalent all year,as global companies sought US acquisitions to enhance theirgrowth through access to US firms’ technology, customers andfaster US economic growth.

• In 4Q14, CB deal value flow returned to normal, enabling the US to eke out net buyer status for the quarter — though both US buyer and seller values round to the same percentage (Figure 23).

• Fifty-two percent ($42 billion) of 2014 global CB value sold came from US targets. That’s unprecedented: before 2014, in ourseven years of producing these reports, the US was a full-year netseller only in 2010, but sold less than half the annual value (45%,or $22.2 billion).

• EMEA companies acquired 75% of 2014 US CB value sold.

• APJ acquired 22% of 2014 US CB value, mostly in Lenovo’s deals for Google’s Motorola and IBM’s server businesses.

• Every other region except “Other” was a net buyer.

• Meanwhile, US buyers were not idle: they bought 502 CB deals (+34% YOY, for a 41% share of all CB deals). They acquired $19.9 billion in disclosed value (-29% YOY), including 55% of EMEA’s $29.2 billion in CB value sold.

• For the year, overall CB volume increased 39% to 1,210 deals, besting all-deal growth of 30%. But 2014 deals targeting the US rose faster: 48% YOY to 297 deals.

• CB aggregate value growth also bested all-deal value for the year:it climbed 49% YOY to $80.7 billion (34% of 2014 total value, up from 29% in 2013). But growth in 2014 aggregate value of US targets outpaced that by a wide margin, rocketing up 4.4 times(341%) over 2013 ($9.5 billion).

• Eleven of the year’s 18 CB deals above $1 billion targeted US companies. Only 12 CB deals topped $1 billion in 2013.

• The 4Q14 CB total value of $20.2 billion was up 1% YOY but down 38% from a post-dotcom-bubble record of $32.7 billion in 3Q14. Five of the $1 billion-plus deals occurred in 4Q14.

• As we saw last year, second-half CB value was much higher than first-half. In 1H14, CB value was $27.8 billion, rising to $52.9 billion in 2H14 (a 90% boost). n

Global technology companiesseek growth in US

2014

CB value acquired $20.2b

CB value sold $20.2b

1%

5%16%34%42%

4%15%34%43%

1% 3%

CB value acquired $80.7b

CB value sold $80.7b

1%

1%

2%

2%

7%52%35%

3%

2%

9%14%25%47%

Europe

US Asia-Pacific Canada Japan India Other

Figure 23: Cross-border deal value flow for technologydeals (disclosed value), 4Q14 and 2014

Cross-border value flow


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4Q14

No. IB deals 0% 50% 100% No. CB deals

387 115

52 38

15 34

24 9

5 19

3 21

12 5

11 5

5 9

7 7

44 56

565 318

4Q14

No. IB deals 0% 50% 100% No. CB deals

42 6

8 5

1 3

1 2

4 4

56 20

For the second consecutive quarter, US CB dealmaking volume declined in 4Q14 but other countries made up thedifference for a small net gain overall.

The US’ combined (corporate and PE) 121 deals in 4Q14 was down 11 deals from 3Q14 (which was down 21deals from a 2Q14 peak of 153 deals). Consequently, US share of CB volume fell to 36% in 4Q14, compared with41% for full-year 2014. Canada (+15 CB deals over 3Q14) and Germany (+9) made up the difference in 4Q14,while most other countries rose or fell by only 1 or 2 deals. In all, 4Q14 CB volume was 338 deals (+41% YOY), 6 more than in 3Q14.

*Additional countries with one PE deal in Q414: Australia, Bahrain, Brazil, China/HK, France, India, Netherlands and Russia.



Figure 24: Global corporate and PE deals by acquiring country: cross-border and in-border, 4Q14

Corporate deals

Top 10 countries 4Q13 deals 4Q14 deals % total deals

US 447 502 57%

UK 40 90 10%

Canada 39 49 6%

Australia 13 33 4%

France 18 24 3%

Germany 11 24 3%

India 4 17 2%

China/HK 12 16 2%

Sweden 9 14 2%

Japan 13 14 2%

Other 51 100 11%

Total 657 883 100%

PE deals

Top 10 countries 4Q13 deals 4Q14 deals % total deals

US 48 48 63%

UK 4 13 17%

Sweden 3 4 5%

Canada 0 3 4%

Other 6 8* 11%

Total 61 76 100%


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Figure 25: Global technology transactions value flow bysector, 4Q14 and 2014

Technology entrepreneur and investor Marc Andreessen famouslywrote, “software is eating the world.”1 Well, it turns out that soare CE, CPE, internet, IT services and semiconductors.

In 2014, the non-technology buyers whose industries are beingdisrupted by digital technology transformation spread their acquisitionsacross all technology sectors. At the same time, however, softwareactually increased its lead as technology’s most targeted sector. In4Q14, non-technology buyers’ transaction value soared — followinga multi-year pattern of increasing throughout the year.

• Non-technology M&A dollars were spread more evenly in 2014 than 2013, when little went to semiconductor, internet or CE deals. But in 2014, semiconductor deals accounted for 9% of transaction value, CE 10%, CPE 14%, software 15%, internet 23% and IT services 31%.

• Non-tech buyer volume (475 deals in 2014) increased 36% YOY,compared with only 30% for all technology M&A. Their disclosed transaction value soared in 4Q14 to $9.3 billion, 93% above their average for the first three quarters.

• Advertising and marketing technologies drove up the value of non-tech acquisitions in IT services, acquired mostly by advertising agencies and media companies. There were also a large number of deals by telecom operators for cloud hosting, storage or managed services providers.

• Media organizations also were prominent internet buyers. Many deals targeted social networking, advertising and marketing, and e-commerce web operations or infrastructure technologies. In CPE, non-tech buying was focused on deals that added electronics capabilities to manufacturing companies.

• Non-tech buying was most diverse in software/SaaS. Deals included a horse racetrack targeting mobile app development, a health insurer targeting HR benefits SaaS, a telecom operator targeting streaming video distribution SaaS and a textbook publisher targeting e-learning SaaS — to name just a handful of the 153 non-tech deals in the sector. Perhaps software really is “eating” the world!

• Of note, software/SaaS targets had twice as much disclosed value as any other sector. But software/SaaS buyers spent only $38.8 billion, and only 81% of that on in-sector targets — showinghow all others targeted the sector.

• Roughly half of all PE disclosed value ($19.6 billion of $39.6 billion) was spent on software/SaaS targets, followed by 21% on IT services targets and 12% each on internet and CE.

• But internet companies acquired even more software/SaaS value: $24.7 billion (54% of internet buyer disclosed value). n

Non-technology buyers embrace technology transformation

Transaction value flow

4Q14

2014

Buyer $44.9b

Target $44.9b

1%

4%18%17% 24% 8%27%

7%3%15%21% 17% 9%27%

Buyer $237.6b

Target $237.6b

1%

6%2% 17%11% 13% 13%38%

17%19%16%10% 10% 9%17%

Non-techPE Semiconductors

CEIT services Internet

Software/SaaS

CPE

CE = Communications equipment CPE = Computers, peripherals and electronics




02Highlights


09Look ahead

11Appendices

29Methodology

30Source notes

1,6

00

1,4

00

1,2

00

1,0

00

80

0

60

0

40

0

20

0 0

Number of deals

10

0

45

0

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

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11

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12

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Average deal value ($m)

20

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A B C D E F

13

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19

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H

H

Note: we overlaid the indexed NASDAQ com

posite on this chart tracking com

pleted deal activity and value (19

96-200

8). Since 200

8 we are show

ing announced deals less canceled deals to correspond to the deals we have published. To show

correlation

between the NASDAQ and technology industry M&A activity, w

e aligned the index starting point of 100

on the deals axis.

Source: EY’s analysis of Capital IQ and The 451

Group data, accessed 5 January 20

15 and NASDAQ Com

posite Index from

Capital IQ, accessed 14

January 201

5.

This chart shows the striking historical synchronicity with which the volume of corporate global technology deals per quarter has risen

and fallen together with the NASDAQ Com

posite Index over the past 18 years. The average quarterly transaction value (of com

pleted

deals with disclosed values) also appears to move in synchronization with the NASDAQ, though often skew

ed by big-ticket deals (more

in the last four years than ever before). This show

s the influence — both rational and psychological — that macroeconom

ic factors hold

over technology industry M&A activity.

In 201

4, M&A deal volum

e began catching up with the NASDAQ after (unusually) falling behind in 201

3. As a result, for the last tw

oyears, the NASDAQ is up 57

% as of the end of 4

Q14

and M&A deal volum

e is up 37

% in 4Q14

com

pared with 4Q12

.

Figure 26: Historical view of technology M&A activity and NASDAQ Com

posite Index, 199

6-20

1427

5%

3%4%

4%

Top 10

Next 15

$731b$755b

$788b

1Q13 2Q13 3Q13 4Q13

2%

2% 5%4%

–3%

–1%

–1%

–1%

$802b $793b

$266b$253b $276b $267b

2Q141Q14

$489b$478b$512b $535b

$263b

$530b

3%

5%

0%

$817b

$263b

$554b

3Q14

2%

2%

2%

2%

3%

–1%

$830b

$267b

$563b

4Q14

$844b

$264b

$580b

Figure 27: Aggregate cash and short- and long-term investments for the top 25 technology companies, 1Q13–4Q14


YOY cash growth for the top 25 global technology companies held steady in 4Q14. At $844 billion, the aggregatestockpile of cash and short- and long-term investments of the top 25 rose 5% YOY, the same rate seen in 3Q14. Inthe prior year, YOY growth slowed steadily from 16% in 3Q13 to 11% in 4Q13 and 8% in both 1Q14 and 2Q14.

Source: EY analysis of Capital IQ data, accessed 28 January 2015.

02Highlights


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29Methodology

30Source notes


• Global technology M&A update: October-December 2014 and year in review is based on EY’s analysis of The 451 Group M&A KnowledgeBase data for 2013 and 2014. Deal activity and valuations may fluctuate slightly based on the date the database is accessed.

• Technology company M&A data was pulledfrom The 451 Group M&A KnowledgeBasebased on the database’s own classification taxonomy and then deals were aligned to the following sectors: CE, CPE, semiconductors, software/SaaS,IT services and internet companies.Alignment was based on the sector of the target company.

• The data includes M&A transactions between two technology companies as well as non-technology companies acquiring technology companies.

• Joint ventures were not included. • Corporate M&A activity data was analyzedbased on the sector classification of the target company. Prior to 2012, we reported based on the classification of the acquiring company; the change enables a clearer picture of the technologies being focused on for acquisition.

• Equity investments that involved less thana 50% stake were not included in the data.

• PE M&A activity includes both full and partial stake transactions in excess of 50%and was analyzed based on acquisitions by firms classified as private equity, sovereign wealth funds, investment holding companies, alternative investment management groups, certain commercial banks, investment banks, venture capital and other similar entities.

• Unsolicited technology deal values were not included in the data set, unless the proposed bid was accepted and the deal closed based on data available at the timeof analysis.

• The value and status of all deals highlighted in this report are as of 31 December 2014, unless otherwise noted.

• All dollar references are in US dollars, unless otherwise indicated.

• In this report, disclosed deal values may vary from other published values because The 451 Group database methodology automatically subtracts cash acquired, net of debt, from enterprise value. Additionally,announced deal values are often subject to change at the time of close, due to subsequent revisions to the terms of the deal and/or changing stock valuations to the extent stock was used as a deal consideration.

• As used in this report, “total value” refers to the aggregate value of deals with disclosed values for the period under discussion.

• Other definitions: • “TTM” stands for trailing 12 months.• “Multiple of EV/TTM revenue” is the transaction value multiple representing total enterprise value over trailing 12 months of target revenue.

• “Multiple of EV/TTM EBITDA” is the transaction value multiple representing total enterprise value over trailing 12 months of target EBITDA (earnings before interest, taxes, depreciation and amortization).

• “Premium offered” represents the percentage difference between the purchase price and the share price value 30 days prior to theannouncement of the deal. Where data is unavailable from The 451 Group, premium data was accessed via Capital IQ. n

Methodology

02Highlights


09Look ahead

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29Methodology

30Source notes

Source notes


Solution-building drives blockbuster M&A year1 “Why Apps for Messaging Are Trending,”

NYTimes.com, 25 January 2015, via Factiva, © 2015 The New York Times Company.

2 “Why the BlueKai Acquisition by Oracle Is a Big Deal for Programmatic Marketers,” ClickZ, 28 March 2014, via Factiva, © 2014 Incisive Interactive Marketing LLC.

3 Global technology M&A update: July-September 2014, EY,© 2014 EYGM Limited.

4 “The Priceline Group Agrees to Acquire OpenTable, Inc. Conference Call-Final,” CQ FD Disclosure, 13 June 2014, via Factiva, © 2014 CQ-Roll Call, Inc.

5 Global technology M&A update: April-June 2014,EY,© 2014 EYGM Limited.

6 “Michael Dell: Going Private Is Paying Off for Dell,” The Wall Street Journal, 24 November 2014,© 2014 Dow Jones & Company, Inc.

7 “Charterhouse Capital Partners Wins Auction for Skillsoft — Sources,” Dow Jones Institutional News,13 March 2014, via Factiva, © 2014 Dow Jones & Company, Inc.

Regional snapshot: Americas1 “Major Player; After US $4.9B PokerStars deal,

Amaya eyes its next move,” National Post, 14 June 2014, via Factiva, © 2014 National Post.

Regional snapshot: APJ1 “Jiangsu Changjiang Makes Offer for STATS

ChipPAC,” Dow Jones Top News & Commentary, 6 November 2014, via Factiva, © 2014Dow Jones & Company, Inc.

2 Australasia Capital Confidence Barometer, April 2014, EY, © 2014 Ernst & Young, Australia.

Regional snapshot: EMEA1 “Sapient Deal to Alter Publicis’s Profile,”

The Wall Street Journal Online, 3 November 2014,via Factiva, © 2014 Dow Jones & Company, Inc.

Communications equipment1 “Worldwide Smartphone Growth Forecast to Slow

from a Boil to a Simmer as Prices Drop and Markets Mature, According to IDC,” IDC Press Release, 1 December 2014, © 2015 IDC.

2 “China’s Huawei 2014 smartphone sales rise by a third,” Reuters, 31 December 2014, via Factiva, © 2014 Thomson Reuters.

3 “Rockstar Consortium to Sell 4,000 Patents to RPX – Update,” Dow Jones Institutional News, 23 December 2014, via Factiva, © 2014 Dow Jones & Company, Inc.

4 “Datacom up, telecom sluggish in 2014 says Infonetics,” Lightwave, 12 January 2015, via Factiva, © 2015 Pennwell Corporation.

Computers, peripherals and electronics1 “Italy’s GTECH to Buy Casino-Equipment Maker

IGT,” Dow Jones Newswire, 16 July 2014, via Factiva, © 2014 Dow Jones & Company, Inc.

Semiconductors1 “Jiangsu Changjiang Makes Offer for STATS

ChipPAC,” Dow Jones Top News & Commentary, 6 November 2014, via Factiva, © 2014Dow Jones & Company, Inc.

Software/SaaS1 Global technology M&A update: October-

December 2013 and year in review, EY, © 2014 EYGM Limited.

Transaction value flow1 “Why Software Is Eating the World,” The Wall

Street Journal, 20 August 2011, via Factiva, © 2011 Dow Jones & Company, Inc.

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29Methodology

30Source notes


02Highlights


09Look ahead

11Appendices

29Methodology

30Source notes

EY | Assurance | Tax | Transactions | Advisory

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors forspecific advice.

About EYEY is a global leader in assurance, tax, transaction and advisory services.The insights and quality services we deliver help build trust and confidencein the capital markets and in economies the world over. We developoutstanding leaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in building a better workingworld for our people, for our clients and for our communities.

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About EY’s Global Technology CenterEY’s Global Technology Center (GTC) is a network of 15,000 technologypractice professionals from across our global member firms, all sharing deeptechnical and industry knowledge. Our high-performing teams are diverse,inclusive and borderless. Our experience helps clients grow, manage, protectand, when necessary, transform their businesses. We provide assurance,advisory, transaction and tax guidance through a network of experienced and innovative advisors to help clients manage business risk, transformperformance and improve operationally. Visit us at ey.com/technology.

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Pat HyekGlobal Technology Industry Leader+1 408 947 [email protected]

Technology service line leaders

Jeff LiuGlobal Technology Industry Transaction Advisory Services Leader+1 415 894 [email protected]

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Issue 26 Global technology M&A update - Ernst & Young€¦ · Global technology M&A ... is creating more need for true solutions-oriented selling, ... Average value of deals with