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Technology Merger and Acquisition Outlook for 2015

Many silicon valley venture capital firms would prefer to forget the epic dot-com bubble that lasted from 1997 to 2000. But who can forget their naive rush to invest in some of the most absurd Web 2.0 start-ups and silly Social Media companies? It was truly unprecedented.

Granted, the people who would most like to erase those memories are the senior executives at large corporations who helped to orchestrate the acquisition of a dot-com flop, at ridiculous market evaluations, then close the failed business within a year to eighteen months of the purchase.

That fiasco would never happen again. Or, could it? Technology-related mergers and acquisitions (M&A) spending in 2015 is likely to continue at the record pace that was set last year, according to the latest market study by 451 Research.

Bullish sentiment from corporate acquirers and bankers, combined with an optimistic macro-economic environment and a re-energized private equity market, is fueling the current M&A outlook, according to the analyst firm.

They believe that meeting or exceeding 2014 levels of technology M&A spending would be a high bar, given that acquirers spent $439 billion in 2014 -- the highest investment level since 2000.

"2015 appears likely to continue the deal-making momentum we experienced in 2014, which was the highest level of technology M&A spending since the dot-com collapse," said Brenon Daly, research director at 451 Research.

Daly says that Technology, Media and Telecom (TMT) investment bankers have told him that their pipelines are fuller than they've been in years, while corporate development executives indicated they expect to be even busier this year.

According to 451 Research, more than half of corporate acquirers (58 percent) indicated that they expected their own company to pick up the pace of deal making in 2015. That was the highest forecast by strategic buyers in the technology M&A marketplace in a half-decade.

More than three-quarters (77 percent) of investment banking survey respondents indicated that the aggregate value of technology-related transactions they are currently working on is higher than it was a year ago. That stood as the second-highest assessment in the past half-dozen years of the 451 Research Survey.

The 2015 M&A Outlook Report provides analysis of the M&A drivers in key enterprise technology segments. The tech sectors they assessed include:

  • Information Security: Consolidation is inevitable as vendors expand their existing portfolios to meet intensifying customer demands.
  • Mobile Internet: The need for end-to-end enterprise mobility solutions that can provide bottom-line results and add analytics will drive healthy M&A activity.
  • Cloud Computing: IT infrastructure acquirers will look in part to acquisitions to add new high value offerings on top of their raw compute offerings.

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