2012 has been an interesting year so far for business, the economy, politics, and mergers and acquisitions. M&A activity was down in 2012, both in terms of the number of deals done and in valuations.
Much of this softness was due to uncertainty about US elections, the European debt crisis, and the US fiscal cliff. As a result of the uncertainty, many potential buyers have excess cash on their balance sheets and haven't spent much of it on acquisitions. Many large companies are, in fact, considering distributing large dividends, rather than plowing that cash into growth or funding M&A. A recent article in Forbes highlighted that Apple, Google, Oracle, and Microsoft have a combined $171 billion in cash, and are considering large dividend distributions in response to the fiscal cliff.
But despite all of the uncertainty and cash-hoarding by buyers, 2012 still offered a great deal of technology-related M&A activity, especially in the middle market. It should also be noted that companies like Google and Oracle are still doing plenty of acquisitions, just not such large ones as in the past.
I took a look at tech acquisitions worldwide for the first 11 months of 2012 to get a sense of who's been buying, how big the deals were, and what kinds of valuations we saw. While The McLean Group is a middle-market bank, focusing on companies with valuations typically under $100 million, I wanted to look at the big picture, including the larger deals, too. I was also interested to find that less than 1 percent of tech M&A deals done this year were greater than $1 billion, and we estimate that 95 percent of them were $100 million or less. While the billion-dollar deals get most of the attention, the midmarket deals obviously drive a lot more action.
Here are the highlights from the first 11 months of 2012:
4,136 technology M&A deals were announced. This primarily included "tech" product companies, but not IT consulting companies
Buyers with the largest number of announced deals included:
The average multiple (enterprise value/revenue) was 3.5
The average deal size of announced transactions was $93 million, but this is a little misleading. Two-thirds of deals did not report metrics, as is common for smaller deals -- those less than $100 million. One can make the reasonable assumption, therefore, that approximately 95 percent of all deals were "middle market," meaning below $100 million in deal value. On the other hand, out of 4,136 deals, only 31 were $1 billion or more.
Here are some of the more interesting deals for those of us from the electronics and software industries:
Cisco acquired Cariden Technologies, a network traffic management software company, for $141 million.
MIPS Technologies entered into an agreement to sell its patent portfolio to a consortium including ARM and Intel for $350 million. It then received an offer to sell its operating company to Imagination Technologies for $60 million, which was later bettered by CEVA, which offered $75 million.
Intel acquired ZiiLabs Inc. from Creative Technologies for $50 million. ZiiLabs, formerly known as 3DLabs, is a media processor and GPU vendor.
Cisco acquired Meraki, a cloud computing management company for $1.2 billion
NetScout made a couple of acquisitions, including Onpath Technologies, a network management and security firm, and the customer service assurance division of Accanto Systems
Riverbed Technology acquired Opnet Technologies, an applications performance management software company, for $994 million.
Digia acquired the remainder of the Qt business from Nokia, for $4.9 million, completing the divestiture of the open-source UI framework that Nokia had acquired through its Trolltech acquisition in 2008 for $154 million.
Obviously, these were just a few out of over 4,000. If you are interested in seeing the whole report, or need any guidance on M&A activity for your particular segment, please feel free to contact me at firstname.lastname@example.org.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.