Tech Mergers Tick Up in Q3
Technology merger and acquisition activity picked up during the third quarter, led by SoftBank Group's blockbuster deal in July to acquire U.K. processor intellectual property vendor ARM Ltd. immediately after Britain voted to exit the European Union.
While deals among technology, telecommunications and media companies remain behind the banner year of 2015, deal tracker MergerMarket reported this week that the pace of mergers and acquisitions rose between July and the end of September. The surge was attributed in part of resolution of the "Brexit" question in the U.K. and continuing ultra-low interest rates.
MergerMarket counted a total of 666 deals during the third quarter totaling $179.6 billion, which represented a 39 percent increase in deal value year-on-year. SoftBank's (TYO: 9984) $30.1 billion purchase of Cambridge-based ARM (LSE: ARM, NASDAQ: ARMH) led the way, following closely on the British EU exit vote. (The estimated value of the ARM acquisition is slightly lower than the $32.25 billion all-cash transaction announced in July.)
SoftBank said the ARM deal underscores its strategy to target the emerging Internet of Things market.
Meanwhile, consolidation in the semiconductor sector continued with Analog Devices Inc.'s (NASDAQ: ADI) acquisition in July of for analog chipmaker Linear Technology Corp. (NASDAQ: LLTC) for nearly $13 billion. Massachusetts-based Analog Devices specializes in data conversion and signal processing chips.
The chip acquisition follows a string of earlier deals, including Intel Corp.'s (NASDAQ: INTC) acquisition last year of FPGA specialist Altera Corp. Intel announced a new line of FPGAs this week based on Altera's Stratix line that target datacenters, cloud computing and networking infrastructure. Further consolidation in the chip sector is expected, with wireless giant Qualcomm Inc. (NASDAQ: QCOM0 reportedly in talks to acquire NXP Semiconductor (NASDAQ: NXPI). Netherlands-based NXP recently completed its own acquisition of Freescale Semiconductor.
Two large IT infrastructure deals also boosted M&A activity in the third quarter. Last month's $8.8 billion spinoff and merger of Hewlett Packard Enterprise's (NYSE: HPE) "non-core" software assets to U.K.-based Micro Focus (LSE: MCRO.L) was the third largest deal during the third quarter, MergerMarket reported. HPE said it would use the estimated $5 billion in net cash from the deal to pursue other acquisitions as competition stiffens in the hybrid IT infrastructure market.
Oracle's Corp. CTO Larry Ellison made a lot of noise last month about challenging public cloud leader Amazon Web Services (NASDAQ: AMZN). At a more substantive level, the database giant (NYSE: ORCL) shelled out nearly $8.7 billion in July to acquire cloud-computing specialist Netsuite Inc. (NYSE: N).
Third quarter M&A momentum appears to be carrying over into the last three months of 2016 as global companies vie for emerging technologies such as artificial intelligence and related machine learning and natural language tools. A case in point is Samsung Electronics' deal this week to acquire AI startup Viv Labs, formed several years ago by the creators of Apple's (NASDAQ: AAPL) Siri digital assistant.
MergerMarket said it remained "cautiously optimistic" about M&A activity for the remainder of the year, particularly in segments such as software-as-a-service, security and financial technology platforms.