Optimism For Tech M&A On The Rise, Acquihires Still Hot
Optimism for global tech mergers and acquisitions is on the rise and acquihires remain an area of major interest for large corporate acquirers, according to a new report by Morrison and Foerster and 451 Research.
About 50% of corporate executives surveyed are predicting M&A activity to increase in the next six months. Only 7% expect a decrease in activity. That 7% is down from 20% who expected a decrease in deals six months ago. As a measure of heat in the market, executives also are expecting an uptick in bidders and a spike in private company valuations.
In a review of recent past activity, 40% of corporate development executives said deal flow in the past six months was higher than it has been in the past two years, while 36% said deals were down over the past six months.
The report is based on a survey of about 200 C-level executives, corporate development executives, in-house counsel, bankers, venture capitalists and financial advisors. Despite this overall optimism, overall global tech M&A volume is down 15% from a year ago period, 451 reports.
As we’ve noted, the people involved in a acquired company are often the key asset in a deal. About 50 percent of executives expect more focus on talent at target companies prior to acquisition and 40 percent are seeking more ways to retain employees after an acquisition. More telling, about 30% of executives expect an increase in M&A for hiring, i.e. acquihires.
Close to half of executives are seeing price and deal structure affected by the goal of creating incentives for employee acquisitions. The best incentives for retention are new stock options or restricted stock units, followed by future cash bonuses, according to the report.
The technology M&A process may be complicated, but for many buyers, they’re increasingly seeing more and more reasons that deal flow will increase. Could that optimism be a leading indicator for more deal activity in the coming months? Morrison & Foerster corporate partner David Lipkin believes so. Some buyers are finally coming out of the cautious mode they have been in since the recession.
“Our latest survey shows that tech dealmakers are feeling more upbeat these days,” said Lipkin in a statement. “A sizable group reports being more active than at any time since the recession, with particular emphasis coming in such sectors as cloud computing, mobile apps and cybersecurity. And many are betting that M&A will come back to pre-recession levels over the next few years. There is still ample basis for uncertainty but it appears that for a growing number of players, the glass is increasingly looking more than half full.”