Digital disruption spurs record-breaking M&A value in Q3 for APJ: EY

Credit: Tom Saga /

The third quarter of 2016 was another blockbuster quarter for global technology M&A value, thanks in large part to companies being disrupted by innovative digital technologies, particularly in Asia-Pacific and Japan (APJ), which set a new record of $52.3 billion in deal value in Q3.

That’s according to a new report EY report, Global technology M&A report – July-September final look, which found that 3Q16 is now the third-highest aggregate value quarter on record, with $155.5 billion in disclosed value globally. That’s an increase of 22% from 2Q16, and 138% year-on-year. At $349.4 billion, year-to-date (YTD) aggregate value is 30% higher than YTD 2015’s all-time record pace.

APJ buyers pursue big-ticket acquisition of US and EMEA companies

Driven by activity in Japan, China, India and Australia, APJ value rose to a new record in which APJ disclosed value rose 33% sequentially and 2,156% YOY to $52.3 billion in 3Q16. Demonstrating the region’s rapid tech M&A growth, APJ’s $120.8 billion in aggregate value YTD is already more than double the $51.5 billion total for full-year 2015, the EY report says.

Many deals focused on cloud/SaaS, mobility, big data analytics, gaming, and advertising and marketing. The blockbuster size of APJ deals reveals the strong acquisition appetite of APJ companies, says EY.

In fact, the $32.4 billion SoftBank Group-ARM megadeal was the largest global transaction for thebquarter and accounted for 62% of the region’s deal value. This and four other deals where US and EMEA companies were targeted by Japanese and Chinese buyers accounted for 89% of APJ value.

This regional trend toward big-ticket deals is a global phenomenon. Globally, last quarter’s new record for the most tech deals at or above $1 billion was surpassed in 3Q16 with 32 deals, four more than the prior record of 28 big-ticket deals in 2Q16. With total aggregate value of US$129.7b, their value more than triples that from 3Q15.

Technology dealmaking is setting records because all buyers are motivated in the current environment, said Jeff Liu, EY Global Technology Industry Leader, Transaction Advisory Services.

“Incumbent tech companies seek deals to accelerate mobile- and cloud-driven transformations; non-tech companies seek strategic technologies; and private equity [PE] firms seek opportunity in hidden gems overlooked by many investors,” Liu said.

Joongshik Wang, EY Asean Transactions Leader for Technology, Media and Telecommunications, added that Asian companies are expanding their M&A appetite beyond traditional technology space in developed countries.

“The main reason for increasing cross-border technology investment is to secure R&D and intellectual capabilities, which can be commercialized in the Asian market,” Wang said. “In Southeast Asia, there are already more than five $1 billion tech ‘unicorns’, and we are seeing more investments in the sharing economy space than traditional e-commerce. In that light, the e-commerce sector may experience more mergers and acquisitions as a result of the need to consolidate.”

Private equity firms and cross-border (CB) buyers were also setting M&A records in Q3. PE tech dealmakers drove a second consecutive record high for aggregate quarterly disclosed value at $36.1 billion, 40% above 2Q16’s prior record.

CB aggregate deal value soared to $80.4 billion, eclipsing the prior all-time record by 85%. YTD 2016 already set a new full-year CB value record.

Third-quarter growth drivers

While semiconductor targets had more disclosed value ($54 billion) than any other technology segment, several key areas experienced dramatic growth:

  • Five deals above $1 billion drove security to a sevenfold YOY increase in aggregate disclosed deal value to $16.9 billion
  • Deals targeting smart mobility and advertising and marketing technologies quadrupled YOY in disclosed value, rising 305% and 333%, respectively
  • Internet of Things (IoT) value nearly tripled YOY on the strength of four such deals– including the quarter’s top deal by dollar value, at $32.4 billion.

A full copy of the EY report is available here.

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