Wall Street Beat: Rise in markets could fuel tech M&A

Confidence in the economy will help companies value bigger deals

By , IDG News Service |  IT Management

Increasing confidence in the economy and a rising stock market could lay the groundwork for a revival in tech-sector mergers and acquisitions as companies embrace cloud technology and pursue game-changing software, particularly for the mobile market.

On Friday, the Dow Jones Industrial Average, the Standard and Poor's 500 and the tech-heavy Nasdaq exchange all closed up for the week, marking three straight weeks of gains. Last week the Dow and the S&P broke through to milestone levels -- 15,000 points for the Dow and 1,600 for the S&P.

Meanwhile the Nasdaq closed up 27.41 at 3463.58 Friday, its highest point since 2000, right after the dot-com boom started to go bust.

"Ultimately higher market values should result in higher valuations for sellers and thus result in more deals," said Rob Fisher, PricewaterhouseCooper's U.S. technology industry deals leader, in an email. "To the extent the rising markets are driven by confidence in long term fundamentals that also tends to increase the appetite of buyers who tend to shy away from deals when they have uncertainty about their existing prospects."

After declines in deal volume and value in 2012, the tech M&A scene in the first quarter of 2013 was "dismal," according to a recent report by PricewaterhouseCoopers.

The number of deals closed decreased 38 percent to 40 in the first quarter compared with 65 deals closed in the last quarter of 2012, PwC said. First quarter deal value plunged 60 percent compared to the fourth quarter, to US$8.3 billion. Compared with the first quarter of 2012, deal volume and value decreased 38 percent and 72 percent, respectively.

But things are looking up. Just this week, a number of announced and rumored deals involving big-name tech companies like Intel, BMC, Microsoft and Facebook highlighted what could be a spring awakening for tech M&A.

In the biggest deal of the week,BMC said Monday it has agreed to be acquired by a private investment consortium headed by Bain Capital and Golden Capital, for about $6.9 billion. The move will allow BMC to further develop its IT systems management business to embrace cloud computing without the intense, quarter-to-quarter earnings scrutiny faced by public companies.

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