Defying gravity: US M&A H1 2019: Technology dealmaking stays buoyant

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White & Case LLP H1 2019 has seen deal value continue to climb in technology M&A, as digital disruption overtakes segments of the market such as fintech and Big Data.

While the first-half total of 505 transactions in the technology sector represents a 16 percent decrease in volume compared to the same period of 2018, these deals were collectively worth US$123.4 billion, a 61 percent increase on the first half a year ago. The top end of the M&A market, boosted in particular by the US$25.7 billion purchase of Total System Services by Global Payments, has remained active.

That reflects a natural extension of the M&A trajectory seen in the tech sector over the past two to three years. In the first phase of disruption, M&A volumes were boosted by the desire of private equity firms and industry bidders alike to acquire new entrants, secure key talent and skills, and remain competitive. The sector may now be moving into a second phase, in which a wave of consolidation brings smaller numbers of larger transactions as organizations seek scale.

Global Payments’ purchase of Total System Services provides a good example of this trend, with payments technology companies now seeking to consolidate in order to fend off competition from new fintech entrants to the industry.

The enterprise software segment is another area to have seen significant activity. The sector’s leaders are keen to offer a broader-based product range to help businesses transition to cloud computing—and make the best of the switch. Tableau—which was acquired this year by Salesforce for US$15 billion—is one such firm, developing software tools to make it easier for workers not trained in data science to create visualizations out of raw data.

Valuations in the tech sector remain strong. While there are some headwinds on the horizon, including increased regulatory scrutiny for technology-driven deals, competition for assets still persists. In addition to tech businesses seeking consolidation, bidders include non-tech players seeking to acquire new capabilities as their industries transform, and private equity firms, which still have dry powder at their disposal.

Top tech deals
H1 2019

1: Global Payments Inc. bought Total System Services Inc. for US$25.7 billion

2: Salesforce.com bought Tableau for US$15 billion

3: Hellman & Friedman – Blackstone consortium bought Ultimate Software Group Inc. for US$11.8 billion

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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