Ernst & Young: Volume of tech merger deals still declining

While large transformative deals dominated the technology M&A landscape in Q1, the average deal value appears to have dropped off.


The average value for technology merger and acquisition deals continued to decline over the last three months, according to Ernst & Young's first quarter report.

The global accounting firm noted on Tuesday that while large transformative deals dominated the technology M&A landscape in Q1, the average deal volume fell by another 12 percent.

On a value level, analysts were quick to add a caveat that Q1 estimates exclude Dell's move to revert to operating as a private company. That deal is worth $24.4 billion.

Thus, the Q1 estimate stands that the average deal value was approximately $103 million, down 36 percent annually and 47 percent quarterly.

In February , it was reported that M&A deal value had declined over the course of 2012 by 35 percent worldwide to $114.1 billion from $175.7 billion in 2011.

Joe Steger, a transaction advisory services leader for Ernst & Young’s Global Technology Industry coverage team, explained in the report that "macroeconomic pressures" held back the global technology market last quarter.

We see gradual improvement in macroeconomic uncertainty and a near-term narrowing of valuation gaps as positive signs. However, there is still a lack of confidence around doing large deals in the current economic conditions.

Nevertheless, the future isn't all doom and gloom. Steger pointed towards other market verticals, in particular, for help:

Gradually improving macroeconomic conditions, improved confidence, increased stock market valuations and the need for companies to respond to the transformative impact of the five megatrends - smart mobility, cloud/SaaS, social networking, big data analytics and accelerated adaptation, all point to a steady, gradual increase in technology M&A activity over the next several quarters

Additionally, analysts highlighted growth among deals involving mobile apps. Ernst & Young reported that there were nearly 60 deals for mobile app or related technology during the first quarter.

While most of the deal values weren't disclosed, the common theme were social apps that aggregated user reviews about consumer-friendly topics (i.e. dining, movies, travel, etc.) for recommendations to other mobile users.