Tech Execs See a Dealmaking Surge in 2014 — Maybe
Think there haven’t been enough mergers-and-acquisition deals among tech companies lately? Well, a new survey of senior tech executives and other dealmakers suggests that the dealmaking pace may speed up in 2014.
The survey, conducted in October by the law firm Morrison & Foerster and the research firm 451 Research, asked 200 C-level executives, corporate lawyers, venture capitalists and investment bankers about their views on M&A activity in the coming six months. At least half said they expect an increase, which is slightly down from the 54 percent in an April survey.
But, if you assume that a decrease in pessimism implies an increase in optimism, there’s this: The number of people who expect the pace of deals to slow down declined substantially, from 19 percent in April to seven percent as of last month. Meanwhile, 43 percent said they expect the pace to “stay the same.”
Deal volume was generally down by 15 percent this year versus the same period in 2012, and even more compared to 2011. Given that, the survey — which has been conducted three times previously — included a new question: What are the chances that deal volume will bounce back to pre-recession levels by 2018? Forty percent said that it “probably” or “absolutely” will recover, while 31 percent gave it a 50-50 chance; 29 percent said they didn’t think it will recover.
So, what about the biggest consideration in a deal — valuations? Will they rise or fall? Most — 43 percent — said they expect valuations of target companies to stay the same, while 36 percent said they expect an increase, and 21 percent said they expect a fall. That’s a shift from April, when more than half said they thought valuations would rise.
But there’s more to it than money. More than half of the respondents said they expect they’re going to pay closer attention to assessing the talent of the people working at target companies, which would imply a possible increase of the sort of “acqhire” deals that have been so popular in recent years. But? Ask the respondents specifically about acqhire deals, and only 30 percent said they see them increasing as a way to get more employees. Another 40 percent said they’ll be looking at new deal structures as a way to retain people who work at acquired companies.