By, Dr. Jens Kengelbach, Partner and Managing Director at The Boston Consulting Group; Dr. Georg Keienburg, Principal and Core Member of the Corporate Development and Industrial Goods practices at The Boston Consulting Group; Timo Schmid, Principal in the Munich office of The Boston Consulting Group; Ketil Gjerstad, Partner and Managing Director at The Boston Consulting Group; Jesper Nielsen, Partner and Managing Director in the London office of The Boston Consulting Group; Decker Walker, Partner and Managing Director at The Boston Consulting Group.
Nearly every industry has been affected by digital and mobile technologies, and many have been upended. This has forced companies to determine how to rapidly access the technologies that can advance their business. For most, the answer is to buy rather than build.
High-tech deals represented almost 30% of the total $2.5 trillion of completed M&A transactions in 2016. Approximately 70% of all tech deals in 2016 involved buyers from outside the tech sector.
This 2017 M&A Report from The Boston Consulting Group sought to answer three questions: What moves Global M&A?; What does the tech M&A marketplace look like?; and Do tech acquisitions pay off for acquirers?
M&A activity remains robust and valuations remain high. The median EV/EBITDA multiple of about 13.6 has stayed well above the historical average of 12.0.
Three big trends drove M&A activity in 2016. China more than doubled its 2015 announced deal value to reach almost $200 billion.
Continuing a trend, private equity firms racked up another record year of deal-making.
Even as the overall M&A market has grown significantly, the share of deals involving a tech target has risen even faster. Today, one out of every five transactions has a clear link to some form of technology.
Deal volume and value involving tech targets have significantly outpaced the overall M&A market since 2012. In 2016, these deals totalled more than $700 billion.
Large-cap deals (more than $500 million) are the main driver of aggregate deal values, but more than 80% of the volume of tech M&A is made up of transactions with a target valued at $100 million or less.
Three of the biggest trends driving market growth are the rise of Industry 4.0, a big increase in cloud computing and cloud-based solutions, and the search for mobile tech and software application providers.
Tech deals add value for the acquirer approximately 50% of the time, which is about the same success rate as for all deals.
In the short-term, the market rewards first-time tech acquirers more than it does experienced dealmakers. New acquirers tend to earn the largest returns at announcement. Longer term, serial tech-target acquirers outperform.
Successful tech acquirers do three things right: follow a focused strategy, develop a tailor-made M&A process for tech targets, and build the right corporate organization to find, execute, and integrate innovative tech firms.