Digital transformation drove global technology M&A in 2016 to an all-time value record, according to the latest EY Global technology M&A report. The centre of gravity of dealmaking is also moving East.
Technology M&A set an all-time value record of $466.6 billion in 2016 driven by disruptive cloud, mobile, social and data analytics. Asia-Pacific and Japan (APJ) aggregate value soared 174 percent to a record $141.4 billion in 2016.
In contrast to the full year’s deal value increase year-over-year (YOY), deal value in the fourth quarter declined 38 percent YOY, according to the EY report.
The second-half slowdown in global technology M&A deal volume suggests tech companies are approaching a dealmaking plateau. But with digital disruption still in its infancy and the extraordinary growth of the Internet of Things (IoT) -related deals, EY does not expect this dip in volume to translate into a long-term decline in dealmaking.
West-to-East Value Shift
APJ was the only region whose aggregate value rose for the year, the region’s rise, coupled with a 23 percent fall in U.S. buyer value, caused a notable West-to-East value shift.
As a result APJ’s share of global technology M&A value nearly tripled to 30 percent from only 11 percent in 2015. The hike was largely driven by China and Japan – both accounted for more than three quarters of the increase. Also, 24 big-ticket deals totalling $108.9 billion in 2016 across APJ dominated the increase.
Fintech and E-Commerce Drivers
EY says activity will continue to be driven by interest from APJ investors in new tech companies in areas such as Fintech, e-commerce and IoT where there are proven business models in the US market. Another possible trend this year will be large institutions showing more interest in disruptive companies to aid them in their digital transformation.
EY counsels that companies should prepare for new disruptions, including artificial intelligence and machine learning, which could push dealmaking even higher late in the year and in 2018.
