Ongoing uncertainty in the global marketplace put a damper on corporate M&A activity toward the end of 2011. Yet one of the biggest tech deals in recent history — the acquisition of National Semiconductor by Texas Instruments — took place this year. The outlook for 2012 remains about the same, according to PricewaterhouseCoopers LLC. The overall pace of M&A will remain lackluster, but companies are prepared to move when an opportunity comes along.
“There will be a greater focus on being able to navigate global market conditions and having more certainty around final deal outcomes,” said Martyn Curragh, US transaction services leader with PwC, in a press release. “We're also continuing to see buyers look towards the emerging markets, such as Brazil and China where local economies are in an upward cycle.”
PwC focuses on acquisitive US companies in its Year-end M&A Outlook. During earnings calls, analysts inevitably ask companies with cash on hand — which include most of the big US tech companies — whether they are planning an acquisition. The inevitable answer: We never rule out buying if the right deal comes along.
Interestingly, PwC said in the press release that the current environment is a seller's market, and that companies with patience are guaranteed to have plenty of suitors:
Sellers are looking for both speed and deal certainty, while simultaneously pursuing various alternative options and scenarios through the full deal timeline to maximize the value of the asset. With sellers in the driver's seat, buyers must remain poised and ready when deal negotiations continue for a prolonged timeframe. Building stronger M&A processes, strategies and capabilities will enable buyers to capitalize on fast-moving deals and monetize new assets quickly after deal close in today's volatile markets.
Curragh put it this way: “Savvy buyers and sellers that thoroughly prepare for and understand every option will be the most successful in executing on growth objectives and deal strategies.”
Technology is one of several sectors that can expect higher-than-usual M&A activity in the coming year, according to PwC:
For more than a decade, M&A volumes in the technology industry have led all other sectors — a trend PwC expects to continue into 2012. PwC sees three broad dynamics driving the increase in deal activity for technology: (1) enterprise vendor consolidation, (2) convergence of computing, communications and entertainment on consumer devices, and (3) the disruptive impact of cloud computing. In addition, high liquidity and generally lower debt positions of the leading technology companies have and will continue to enable them to navigate difficult credit markets in the face of global economic uncertainty. Key sectors to watch for deal activity include storage, mobile devices and social networking.