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APAC tech M&A Q1 down but value up

Deal volume in region in first quarter of 2012 down 33 percent, but average value up 123 percent year-on-year, with about two-thirds of targets out of Asia-Pacific, study shows.
Written by Ryan Huang, Contributor on

The number of technology merger and acquisition (M&A) deals in Asia-Pacific and Japan in the first quarter in 2012 dropped by 33 percent from last year to 33. However, the average value per deal increased by 123 percent--far more than any other region, according to a study.

According to the report by Ernst & Young (E&Y), Asia-Pacific and Japan buyers were particularly acquisitive of out-of-region targets, especially in the United States.

Geographic expansion was prevalent, as roughly two-thirds of deals involved out-of-region targets, noted E&Y.

The report noted that expansion beyond a sluggish home economy motivated the purchase by Japan's NEC of US-based Convergys. It was one of 10 regional deals that targeted U.S. companies. Japanese buyers acquired only one domestic target, five U.S. targets, three in India and one in Argentina, according to the study.

      Top 5 APAC & Japan deals 1Q12
 BuyerTargetValue (US$)
1YoukuTudou$1.1B
2NECConvergys$449M
3SingTelAmobee$321M
4RDACoolsand$46M
5SAI GlobalCompliance 360$42M

"Aggressive cross-border M&A by Japanese companies, encouraged by the country's strong currency, was seen in other industries last year but until 1Q12 had not been as visible in technology M&A," stated E&Y.

Deals in line with key mega trends
The report also noted that the top deals illustrated the region's alignment with key mega trends.

"Deal-making in Asia-Pacific and Japan in 1Q12 focused mostly on strategic technologies such as online video, Software-as-a-Service (SAAS), mobile advertising and application development for mobile platforms," said the company.

It cited the example that smart mobility drove two of the top five deals by dollar value: SingTel's purchase of U.S. mobile ad firm Amobee, and RDA Microelectronics's acquisition of Coolsand.

"The SingTel deal is an example of a non-technology company buying mobile advertising campaign management and analytics software, thus expanding into technology-enabled services with high growth potential," stated E&Y.

The largest deal by dollar value saw China's top online video site, Youku, acquire its main rival, Tudou, in a transaction worth US$1.1 billion.

Optimistic outlook
The total value of the 33 deals was US$2.04 billion--up 26 percent from last year. This compared with the global total which
fell 12 percent year-on-year to US$25.1 billion.The total volume of announced deals in the quarter was 756, including non-disclosed-value deals, up just 1 percent from the same period in 2011.

Joe Steger, global technology industry transaction advisory services leader at Ernst & Young, said in a statement: "Even though technology M&A activity is down year-on-year, it's doing a lot better than M&A in other industries."

"During the first quarter of 2012, the same disruptive mega trends that have been fueling global technology M&A since 2009 are now sustaining technology M&A against the continuing macroeconomic pressures that are holding back other industries," said Steger.

He added that macroeconomic pressures will hold global technology M&A activity to flat or slow growth in 2012.

"But the fact that technology M&A is off
to a much stronger start than in most other industries demonstrates once again that social-mobile-cloud, big data and blur are driving strategic transactions and enabling innovation throughout the global economy. And over the long-term, M&A growth will remain a relatively safe bet for the technology industry because of these megatrends," Steger added.

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