210322 Resource 125361 126222 200444 1217597944084 1222810247876 Controlled Technology Giants Go Shopping In A Down Market

by Don More and Lorie RoscittWhile the recent softness in technology M&A has been well documented, certain companies – which we call the Tech Titans – evidently did not get the memo. These companies (Microsoft, Google, IBM, Cisco, Oracle, and HP – all with market capitalizations in excess of $100 billion and operations that cross multiple technology sectors) have been prolific buyers during the past 12 months.Since August 1, 2007, (which roughly coincides with the start of the current credit ‘crisis’), while the NASDAQ declined 8.7%, the Tech Titans purchased over 60 technology companies, for combined disclosed enterprise value of $30 billion. (Many deal values are undisclosed.) As a group, they paid a healthy median trailing revenue multiple of 4.8x and a trailing EBITDA multiple of 18.5x.As shown in the chart below prepared by Updata Advisors, acquired companies operate across tech sectors highlighting that the Tech Titans are exploiting market weakness to fill out product portfolios, augment growth, and remain competitive.<img hspace="0" src="docs/chart1_PNG.png" align="baseline" border="0" />Eight of the acquired companies purchased in the past year by the Tech Titans were publicly-held companies whose shareholders were paid a median 1-day premium of 28% and a median 30-day premium of 44%.  Overall, at least 50 public IT companies, representing $70 billion of market capitalization, were acquired over the past 12 months. While this marks a decline over the prior year (August 2006-July 2007), which saw $99 billion of public take-outs due to private equity activity, strategic buyer volume actually rose 35% since the market downturn (see chart below).<img alt="Financial Buyers Have Diminished Significantly As Acquirors Of Publicly-Held IT Companies" hspace="0" src="docs/chart2.PNG" align="baseline" border="0" />Tech Titan acquisitiveness, together with a big increase in public-public M&A activity, highlight ongoing strength in tech M&A and a realization that the market is getting more competitive and that the tech market is viewed by buyers as ‘cheap’ by historical standards – perhaps the sign of a nearing bottom. 10 application/xml false Cisco enterprise application software Google Hewlett-Packard HP IBM infrastructure software internet IT M&A Microsoft Oracle software M&A technology M&A Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.0; .NET CLR 1.1.4322; .NET CLR 2.0.50727; InfoPath.1) 127.0.0.1 127.0.0.1 fbartolomey 208.82.213.22 false true false false true 125361 blog blogsite/UpdataAdvisors/web