Ernst & Young's Q2 report: Tech M&A scene still a mixed bag

Despite some bleak numbers, analysts put the blame on bigger economic factors at play here.
Written by Rachel King, Contributor

Ernst & Young has come out with its Technology M&A report for the second quarter, and the bottom line is that things could be better.

Here's the breakdown:

  • Corporate deals were down for the third quarter in a row. The aggregate value was $19.5 billion, down 32 percent annually -- the lowest level since 2008
  • Corporate deal volume: 570 deals -- its lowest level since 2009
  • Total deal volume: 627 deals, down five percent sequentially and 14 percent annually -- the lowest level since 2010
  • Total value of disclosed-value deals: $33.4 billion, down eight percent sequentially and flat when compared to the same quarter last year.

Some silver linings: Information security returned as a top 10 target for the first time since the fourth quarter of 2011, while private equity deal value was up by 208 percent year-over-year to $13.9 billion.

Despite that rather bleak picture, Joe Steger, a global technology industry transaction advisory services leader at Ernst & Young, tried to put the second quarter into perspective:

Given the deal-driving force of the five transformative technology megatrends of mobile-social-cloud, big data analytics and accelerated technology adaptation, it might seem surprising that global technology M&A levels of activity aren't higher. But, there are a set of counterbalancing forces holding down the expected levels of activity. These include: chronic macroeconomic and geopolitical uncertainty, unresolved regulatory, fiscal and tax issues, and valuation gaps. Collectively, these forces may be causing M&A to reset to lower levels of activity across all industries. That said — I expect the strength of the five megatrends to prevail in technology, resulting in slow, steady M&A growth.

To compare, last quarter the global accounting firm found that while large transformative deals dominated the technology M&A landscape, the average deal volume fell by another 12 percent.

A separate study from Pricewaterhousecoopers posited that Q2 ended with 32 transactions completed -- a 22 percent decrease from to 41 in the first quarter -- but the average deal value increased to $433 million, up from $253 million in Q1.

The accounting firm also suggested that the number of deals announced (or at least rumored about) were up, translating to potentially good things for the market in the months to come.

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