Longtime technology firms cannot be wallflowers in what appears to be an accelerating dance of M&As. With tech trends moving rapidly, digital giants flush with liquidity are looking to catch up via dealmaking rather than organic growth. This trend is set to impact companies active in the London corporate finance scene as well.
Four companies found new partners in sizable deals recently: Western Digital increased its power in the memory market by acquiring competitor SanDisk for $19 billion, while LAM Research snatched up KLA Tencor for $10.6 billion in a merging of two semiconductor companies.
This follows the blockbuster $67 billion acquisition by computer giant Dell and private-equity firm Silver Lake of data storage company EMC, the largest deal in the history of the tech industry.
A lot of these companies are seeing a bipolar spending environment, and the boards and the CEOs are taking off the rose-coloured glasses and making the tough decisions. They realise it’s either get acquired or strategically buckle up and get ready for the next growth phase, which could be these companies making acquisitions themselves.
The semiconductors industry, in particular, has been a hotbed of consolidation and isn’t likely to slow.
Back in May, there were two notable recent chipmaker mergers: Avago’s $37 billion Broadcom acquisition and Intel’s $17 billion bid for Altera. Chipmaker Microsemi has recently made a $2.2 billion bid for fellow California-based chip company PMC-Sierra, outbidding a $2 billion offer from Skyworks Solutions. Semiconductor companies beyond Microsemi will look for scale and target companies that have good synergies.
M&A benefits can include lowering expenses by, for example, reducing management costs and redundant R&D, as well as increasing production efficiencies. A recent FBR & Co. report found that recent tech deals eliminated more than 10% of expenses in large acquisitions and as much as 20% in smaller acquisitions.
IBM is one company likely to make progress through M&As. They are trying to sell Humvees and big gas guzzlers where IT managers and CIOs are looking for Teslas. That’s where a lot of these tech giants find themselves. They are not ready for this evolving IT environment and they really have missed out along with their tech brethren. Possible targets for IBM include cloud-data companies Salesforce.com and security company Palo Alto Networks.
Oracle is another one on the hunting trail. Rumors have been out there that the company might attempt to acquire competitor Salesforce. Oracle, a provider of database software, is losing customers because enterprise and governments are starting to move away from their services as more of the budgets is going to cloud, cybersecurity and big data.
A conversation is never wasted. We’re confident that we can give you all the help you need, but we’ll tell you if we think there’s a better option for you.Get in Touch