Strategic Buyers say they will Step Up Acquisitions in 2019

Global corporate and financial buyers continued their shopping sprees last year, with shareholders who chose to explore a transaction reaping the rewards of this strong market.

Tech M&A transactions in 2018 came very close to the lofty heights reached in 2015.  Total Deal Value for 2018 reached $574B on 3,659 transactions, compared to 2015’s Total Deal Value of $577B on 4,452 transactions.  It follows then that the median deal value in 2018 increased to $54.3M, up almost 60% over 2015, at $33.8M.

Tequity’s results in 2018 reflected the strong global market in tech M&A. We announced 8 successful transactions across a variety of markets including Healthcare, Digital Transformation, Retail, IT Services, and Security.

Median multiples tracked across all verticals globally show the strength in valuations achieved last year.

Vertical software applications led deals in the market globally:

What is Ahead for 2019?

Over half of the respondents surveyed in the 451 Research Tech Corporate Development Outlook in December indicated that they plan to step up their shopping in 2019 with 56% of corporate buyers predicting that their company would be more active in the coming year – nearly five times the 12% that expected a slower pace.

Nascent intelligent technologies are especially in demand. In every edition of the past three surveys, more than three-quarters of senior bankers forecast an uptick in deals for the emerging technology that adds smarts to products such as ERP systems, call-center operations, network traffic analysis and elsewhere, with Machine Learning expected to outpace everything.

The good news is that much of the corporate confidence that we saw throughout most of last year looks like it will continue to spill over into 2019. 2018 had started to soften in the second half but then got an additional boost from the tax law changes, with corporate tax rates getting slashed from around 35% down to 20%. More significant for large tech vendors – many of which do more than half of their business outside the US – the tax overhaul did away with most of the penalty for bringing home profit generated overseas.

The Takeaway

Corporate buyers continue to have the means to shop and the will to shop – offering optimal conditions for those shareholders interested in seeking a full or partial liquidity event in 2019. It will be imperative for those who have decided to hold and grow to be prepared to compete against much larger organizations as the accelerated pace of acquisition continues in 2019. For those who are trying to decide whether this is the year to explore their options, take note: conditions are not likely to get any better than they are right now.

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