Digital transformation spurs tech M&A to close in on record

Mergers and acquisitions let companies keep up with the pace of innovation

The digital transformation of business via cloud, mobile and big data technology is fueling IT mergers and acquisitions, which are set to rocket past the record level set back in 2000 as the dot-com era crested.

Enterprises are adopting cloud and mobile technology to stay competitive, and technology companies are scrambling to keep up with demand. Through the end of October, the value of publicly disclosed technology-related mergers and acquisitions  globally was US$396.4 billion, virtually assuring that 2000's record of $412.4 billion will be exceeded, according to Ernst & Young (EY).

This year's blistering pace in M&A is likely to continue, according to executives polled by EY. Forty-five percent of tech executives surveyed plan to actively pursue acquisitions in the coming year, according to its "Capital Confidence barometer - Technology" report, published Tuesday. That number is higher than in the last three surveys launched in the same third-quarter period, EY said.

"While digital disruption is not a new story, we have clearly entered a new chapter in its impact on M&A" said Jeff Liu, global technology industry leader for transaction advisory services at EY.

"We don’t think innovation can happen quickly enough organically; we're in a window where M&A is the best route to achieve that transformation," Liu said.

M&A is one way for tech and non-tech companies alike to keep up with the pace of innovation, and 80 percent of tech executives forecast that global M&A will thrive in the next 12 months, according to the EY report.

Digital transformation is affecting corporations in different business areas, according to EY. "Data centers and networks are becoming software-defined; server, storage and and network hardware are converging; mobility is changing enterprise application development models," according to EY. "Perhaps the biggest ongoing transformation of all is the move from corporate data centers to public and hybrid clouds."

The third quarter of the year set a seventh consecutive post dot-com bubble record for technology deal volume, with 1,069 publicly disclosed mergers and acquisitions, according to EY.

New customer behaviors, more than any other category, were cited by 46 percent of tech executives polled as driving IT vendors to buy non-tech companies. For example, Liu noted, IBM announced in October that it would buy Weather.com and other digital assets from The Weather Company for its Watson IoT Unit and Watson IoT Cloud platform. IBM's Watson cognitive computing services are embedded in a diverse set of the company's analytics offerings.

Many old-line industrial companies and businesses in traditional, slow moving sectors like agriculture, oil and gas, are snapping up analytics as a way of improving margins, Liu noted. "They've cut expenses, laid off staff and flushed all the excess costs out of the business and now they are doing predictive analytics to optimize logistics, inventory and systems management," Liu said.

M&A is also being driven by companies whose main business is not necessarily IT, which are acquiring tech companies to help digital transformation efforts or building out their own technology offerings. For example, GE recently announced its GE Digital division, which will combine its various technology efforts to compete in the IoT market. The unit will bring together GE's Software Center; the Global IT and commercial software teams; and  Wurldtech, which offers industrial security systems.

The highest-value tech acquisition announced in October was Dell's $67 takeover of EMC. But even without that deal, October would have been the highest month of the year for tech company buyers, EY said. The second highest publicly disclosed deal was Western Digital's $19 billion acquisition of SanDisk.

EY polled 1,600 executives in 53 countries for its Capital Confidence Barometer report.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Bitdefender 2019

This Holiday Season, protect yourself and your loved ones with the best. Buy now for Holiday Savings!

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?