Canada ended the second quarter of 2011 on a high note as one of the top 10 countries for corporate technology mergers and acquisitions, with numbers increasing from 21 deals in Q2 2010 to 30 in Q2 2011, according to Ernst & Young’s Global technology M&A update.
“Average global deal value skyrocketed to US$194 million in the second quarter of 2011, and the numbers here at home were just as strong,” says Tony Ianni, leader of corporate finance in Ernst & Young’s Transaction Advisory Services practice. “Canada saw the second-highest number of cross-border deals, behind the United States — an uptick in volume and value we’ve seen developing over the last several quarters.”
Big-ticket deals drove the total value of global tech M&A to US$52.1 billion in Q2 2011, nearly doubling the deal value from an already strong first quarter. Global cross-border deal volume also increased 16% from Q1, while domestic deals declined by 11%. Not only that, cross-border deals showed a 32% increase over Q2 2010 numbers.
The total value of global deals with disclosed values increased by 92%, from US$27.1 billion in Q1 to US$52.1 billion in Q2 — a 69% increase from Q2 2010 (US$30.8 billion). While 61% of all disclosed value was concentrated in the top 10 deals, there was also significant deal-making strength at the opposite end of the spectrum, in deals of less than US$100 million.
This surge was powered by industry consolidation and ongoing disruptive innovation in the following areas:
- Cloud computing
- Smart mobility
- Internet and mobile video
- Smart grid and solar energy
“New waves of innovation, especially around smart mobility, cloud computing and social networking, are driving large and small deals across the globe,” says Ianni. “Not only did Q2 have the highest quarterly average since the first quarter of 2000, it also had the 20th-largest global technology deal ever by dollar value.”
Technology companies that continue to stockpile cash will have the flexibility to act when strategic M&A opportunities arise. Cash and investments held by the sector’s top 25 companies grew to US$591 billion by the end of Q2 2011 — an 18% year-over-year increase from US$499 billion at the end of Q2 2010.
“Interest in the technology sector continues to rise as information technology evolves into an increasingly valuable component of all products and services,” says Ianni. “But the question on everyone’s mind is whether deal-making will lose momentum or continue to overcome increasing divergence between buyers and sellers over valuation, geopolitical unrest and global debt issues.”