Tech Companies' Appetite for Acquisition Increases
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Busy Tech Buyers
75% of tech companies completed at least one M&A deal in 2014, and 81% are expected to initiate at least one M&A in 2015 while 11% anticipate pursuing 11 or more. -
Big Money
One-half of survey respondents say the average enterprise value per acquisition will be $250 million or less, and 46% indicate that it will be between $250 million and $999 million. Another 4% predict it will be at least $1 billion. -
Winning Ways
54% said a top factor for a successful M&A is a well-executed integration plan, while 21% cited the correct valuation of a deal. -
Enhancement Effort
Beyond increasing revenue or cutting costs, 50% said access to intellectual property and/or talent is a primary reason for future tech acquisitions. 42% said they're seeking to "bolt on" or "tuck in" acquisitions to enhance new products. -
Trendy Trio
54% said that mobile will be a key tech trend that drives M&A activity in 2015, while 48% cited the cloud and 47% data/analytics as key trends. -
Deep Pockets
39% said an abundance of cash reserves will fuel deal activity this year. -
Assessment Gap
67% said the valuation disparity between buyers and sellers will present major challenges in deal making this year, while 39% say the identification of suitable targets will. -
Due Diligence
32% said their tech companies review their portfolios of business units, products and/or assets for potential acquisition targets on a monthly basis, and 27% do so quarterly. -
Growth Strategies
Outside of M&A, 44% said their tech companies will focus on new product development to increase revenues and 22% will consider expanding geographically to do so. -
Parting Sentiments
66% said the most preferred exit strategy for companies will be a sale to a strategic buyer and 11% said a preferred exit will be a sale to a financial buyer.
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Why Metrics Matter to the Channel After a strong 2014, merger and acquisition (M&A) market is expected to keep growing this year, according to a recent survey from KPMG, an audit, tax and advisory firm. The vast majority of tech companies included in the study expect to make no less than one acquisition in 2015, but a notable share anticipate making at least a dozen. Mobility, data/analytics advancements, cyber-security and the cloud are fueling this trend, as tech companies seek intellectual assets and tech talent to sharpen their competitive edge. It doesn't hurt, of course, that the IT industry can take advantage of a wealth of available cash reserves to make these deals happen. To ensure successful M&As, tech organizations will seek to incorporate effective integration plans, while fine-tuning their valuation strategies. (Speaking to the latter, the difference in valuation perceptions between buyers and sellers remains a key M&A challenge, findings show.) Outside of mergers, projected revenue growth drivers for the tech industry include product development and geographic expansion. KPMG provided Channel Insider with data gleaned from nearly 100 U.S.-based finance officers and M&A professionals in the tech industry who took part in the research.
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