Skip to main content

Explore the Technology Vendor M&A Outlook for 2016

According to 451 Research, the leading acquirers will spend hundreds of billions of dollars to buy innovative technology companies in the coming year. They're reacting to the rapidly changing marketplace, where information security and the Internet of Things (IoT) are the focus for major new investments.

Two key trends will drive much of the action in software M&A activity -- the movement of business applications and IT infrastructure to hybrid cloud-based service models, plus the need for new data management capabilities to address the growing demand on IT resources anticipated from IoT.

Furthermore, the digital transformation and big data analytics sectors will also drive M&A activities throughout the year. The pool of likely candidates to either be acquired or have a public stock offering is significant. As an example, their forecast for the software market identified more than 90 companies as potential M&A targets in 2016, and another 13 private companies as potential IPOs.

Technology M&A Trends for 2016

Because API management platforms represent some of the core enabling technology needed for IoT platforms and hybrid IT integration, 451 Research expects 2016 to bring increased acquisition activity around API management vendors, which was an active area for M&A in 2015.

In addition, communication service providers looking to bring IoT platforms to the market, and the technology vendors that serve those telecom service providers, are also strong potential acquirers.

Another M&A trend the market saw in 2015 is the rising importance of information security. According to an annual survey of technology investment bankers, for the first time in five years, mobility was displaced by enterprise security as the number one area of expected M&A spending increases in the coming year.

Two out of 10 investment bankers expect "substantially more" and another 52 percent anticipate "somewhat more" acquisition spending this year in the IT security market. 451 Research tracked 133 deals in the information security sector totaling $10 billion in 2015.

Though overall security revenue continues to increase among vendors in this sector, oversupply is a real concern. There's already some evidence that growth is slowing for incumbents. According to the 451 Research assessment, the market will be most active in data security, identity and access management.

The Anticipated Tech Market Correction

IoT will rise in prominence on M&A agendas in 2016, as key industry players consolidate in order to expand their portfolios to fill roles in the IoT value-chain. They'll either increase the breadth and depth of IoT adjacent services, and/or position themselves as end-to-end service providers.

"Though there will be billions in investment in these hotspot technology sectors, the deal-making environment in 2016 has changed dramatically and the market will see a much slower growth environment, with a lower volume of transactions and a dramatic drop in valuations," said Brenon Daly, research director at 451 Research.

Nearly two-thirds of senior executive respondents in the 451 Research 2015 survey of investment bankers indicated they see deal pricing coming down in 2016, compared with just 14 percent that anticipated valuations ticking higher.

That's almost a direct reversal of the typical valuation outlook over the past half-decade given by M&A advisers. Corporate buyers are even more bearish than their advisers, at least when it comes to their mainstay transactions.

Moreover, 74 percent of corporate development executives forecast that the M&A valuation of private companies would tick lower in 2016 compared with 2015. A trend of lower valuations in 2016, if they take place, could mean significant bargains ahead for the technology sector buyers.

Popular posts from this blog

Industrial Cloud Computing Apps Gain Momentum

In the manufacturing industry, cloud computing can help leaders improve their production efficiency by providing them with real-time data about their operations. This has gained the attention of the C-suite. Total forecast Industrial Cloud platform revenue in manufacturing will surpass $300 billion by 2033 with a CAGR of 22.57 percent, driven by solution providers enhancing platform interoperability while expanding partner ecosystems for application development. ABI Research found the cloud computing manufacturing market will grow over the next decade due to the adoption of new architectural frameworks that enhance data extraction and interoperability for manufacturers looking to maximize utility from their data. Industrial Cloud Computing Market Development "Historically, manufacturers have built out their infrastructure to include expensive data housing in the form of on-premises servers. The large initial upfront cost of purchasing, setting up, and maintaining these servers is

AI Semiconductor Revenue will Reach $119.4B

The Chief Information Officer (CIO) and/or the Chief Technology Officer (CTO) will guide Generative AI initiatives within the large enterprise C-Suite. They may already have the technical expertise and experience to understand the capabilities and limitations of Gen AI. They also have the authority and budget to make the necessary investments in infrastructure and talent to support Gen AI initiatives. Enterprise AI infrastructure is proven to be expensive to build, operate and maintain. That's why public cloud service provider solutions are often used for new AI use cases. AI Semiconductor Market Development Semiconductors designed to execute Artificial Intelligence (AI) workloads will represent a $53.4 billion revenue opportunity for the global semiconductor industry in 2023, an increase of 20.9 percent from 2022, according to the latest worldwide market study by Gartner. "The developments in generative AI and the increasing use of a wide range AI-based applications in data c

Credit Scoring Service Spending will Reach $44B

Credit scoring is a method that lenders use to predict the probability a borrower or counter-party will default on loans, or incur additional charges for repayment -- also known as measuring credit worthiness. The method is a key tool in making credit affordable for individuals and businesses. It links credit products to risk potential, connecting borrowers to secondary capital markets and increasing the amount of funds available. This securing process establishes risk predictability dependent on a number of factors, determined by financial indicators and other publicly available information reported by the credit bureaus. Credit Score Market Development According to the latest worldwide market study by Juniper Research, they now forecast credit scoring services will grow by 67 percent to $44 billion by 2028. Juniper anticipates that emerging markets will experience the greatest growth -- projecting the African & Middle Eastern region to grow by 117 percent over the forecast period