Ey GLBL Tech M&a 1q12

Highlights
Issue 15
JanuaryMarch 2012
Note: all dollars are US$ unless otherwise indicated.
Source: Ernst & Young analysis of The 451 Group Research M&A Knowledgebase, accessed 6 April 2012.
Total number of all announced deals

4Q11
1Q12
1Q11
Corporate PE
722 661 61
756 702 54
689 59 748

$0
$10,000
$20,000
$30,000 $800
$600
$400
$200
$0
$29,602
$25,090
$28,484
$122
$172
4Q11 1Q12 1Q11

Total and average deal values ($m) for deals with disclosed values
PE Corporate
Average value (corporate and PE)
PE average deal value
T
o
t
a
l

d
e
a
l

v
a
l
u
e

(
$
m
)
A
v
e
r
a
g
e

d
e
a
l

v
a
l
u
e

(
$
m
)
$173
$124
$140 $141
$102
$465
$726
Corporate average deal value
Global technology
M&A update
Aggregate value of all disclosed-value deals falls 12% year-over-year
(YOY) and 15% sequentially to $25.1 billion
Deal volume increases slightly 1% YOY and 5% sequentially to 756 deals
Video (especially mobile) and software-as-a-service (SaaS) deals surge
Private equity (PE) deal value soars 171% YOY to $5.8 billion
Americas deal-makers capture 75% of global volume and 87% of
disclosed value
Asia-Pacific and Japan deal-makers focus on out-of-region targets,
especially in the US
EMEA companies are heavily targeted by US buyers
9%
<$100m $100
$500m
$500m
$1b
$1b+
29% 55%
$25,090m

7%
$2,257m
105 deals
$7,345m
32 deals
$13,817m
6 deals
$1,670m
2 deals

1Q12

$3,857m
183 deals
$9,328m
42 deals
$12,845m
5 deals
$2,454m
4 deals
13%
<$100m $100
$500m
$500m
$1b
$1b+
33% 45%
$28,484m
9%
1Q11

Internet
Aggregate value ($m)* Median premium
CE
$1,216
IT services
$2,060
CPE
$2,408
Software/SaaS
$11,554
25%
Semicon.
64%
$6,822

$1,030
124%

0 50 100 150
No. of deals noted
A
v
e
r
a
g
e

d
e
a
l

v
a
l
u
e

(
$
m
)

$200
$150
$100
$50
$0
Health care IT
Smart mobile apps
Cloud/SaaS
Security
Big data
Social networking
Video/online
gaming
Based on available data, semiconductor sector companies
received almost twice the median premium of any other sector
(sufficient data was unavailable to calculate the metric for
three sectors). Last year, the highest quarterly median
premium for this sector was 46%.
CE = Communications equipment
CPE = Computers, peripherals and electronics
* Based on sector of target.
Source: Ernst & Young analysis of The 451 Group Research
M&A Knowledgebase, accessed 6 April 2012.
SaaS acquisition growth separated cloud/SaaS deal-
making from the pack in 1Q12; it had the highest average
value and the most volume of all deal-driving trends.
All are increasing in volume but (not counting SaaS)
health care IT and big data analytics grew fastest.
Note: average deal value is based on the value of disclosed
value deals, while number of deals includes both disclosed
and non-disclosed value of deals noted for the given trend.
At 55% and $13.8 billion, the value of big-ticket deals
($1 billion or more) increased YOY in dollar value and
as a percentage of all disclosed value for the quarter.
Every other deal size declined YOY in terms of
percentage and dollar value.
Note: values may differ due to rounding.
Aggregate value of announced deals by deal
size, 1Q12 versus 1Q11
Deals by sector based on value and median
premium, 1Q12
A directional view of select 1Q12 deal-driving trends
Deal drivers
Five long-term megatrends continue to dominate deal drivers in 1Q12: smart
mobility, cloud computing, social networking, big data analytics and an
increasing sense of cross-sector and cross-industry blur and convergence.
Video technologies, including mobile video, drove an increasing number of
deals in 1Q12.
Patent-related deals grew into a small flow in 1Q12 from more isolated
big-ticket events last year.
Cloud-based SaaS deal-making surged.
Deal activity
At 756 deals, 1Q12 volume was just 1% higher YOY (748 deals in 1Q11)
and 5% higher sequentially (722 deals in 4Q11).
Corporate deal volume increased both YOY and sequentially. It rose 2% YOY
to 702 deals in 1Q12 from 689 deals in 1Q11, and 6% sequentially from 661
deals in 4Q11.
However, PE deal volume declined 8% YOY to 54 deals in 1Q12 from 59 deals
in 1Q11 and 11% sequentially from 61 deals in 4Q11.
Though our observed long-term directional correlation with the NASDAQ
Composite Index continues in 1Q12, the NASDAQs 19% increase in the
quarter is much higher than the increase in technology M&A volume. But
the NASDAQ may be correcting for its steep decline in mid-2011.
Deal value
At $25.1 billion, aggregate announced value declined 12% YOY (from
$28.5 billion in 1Q11) and 15% sequentially (from $29.6 billion in 4Q11).
A fourth-to-first-quarter sequential dip is normal; however, this years 15% dip
was slightly higher than the 10% seen last year, but far less than the 66% drop
seen from 4Q09 to 1Q10.*
Average value per deal increased both YOY (+42%) and sequentially (+1%)
to $172 million in 1Q12, sustaining the higher levels achieved in 2011.
At $19.3 billion, aggregate value of corporate deals declined 27% YOY and
11% sequentially. But the average value of corporate deals increased, 14%
YOY and 1% sequentially.
PE deal values soared YOY: aggregate value increased 171% to $5.8 billion
in 1Q12, while average value increased 612% to $726 million. Sequentially,
1Q12 aggregate value fell 27% from $7.9 billion, while average value for PE
deals increased 56%.
Deals getting done
YOY, only the internet and semiconductor sectors saw deal volume decline.
Sequentially, volume increased in every sector except software and SaaS,
which consistently has the highest volume of any sector.
Average deal value increased YOY for three sectors (communications
equipment, internet and software) and average value declined for three sectors
(computers, peripherals and electronics, IT services and semiconductors).
Cross-border deals
Cross-border (CB) deal-making was restrained in 1Q12, continuing a trend we
saw in the second half of 2011. At 236 deals, CB volume declined 5% YOY and
by 1 deal from 4Q11.
At $11 billion, aggregate value of CB deals declined 15% sequentially, but held
steady as a percentage of all aggregate value (CB plus in-border(IB)) at 44%
in both 4Q11 and 1Q12.
First quarter picture unfolds
2 Global technology M&A update: January-March 2012
* Though based on two different data sources, we believe this comparison is useful from a directional
perspective. For a full explanation of methodology changes for this report, see Methodology, page 27).
Contents
4 2012 starts with a mixed quarter
10 Look ahead
12 Top of mind: increasing PE activity alters the technology M&A landscape
14 Regional snapshot: Americas
16 Regional snapshot: Asia-Pacific and Japan
18 Regional snapshot: Europe, Middle East and Africa (EMEA)
21 Appendix of additional charts
22 Global technology corporate and PE transactions scorecard by sector
23 Cross-border corporate and PE transactions scorecard by sector
24 Global corporate and PE deals by acquiring country: cross-border and in-border
25 Cross-border deal value flow for technology deals
26 Source notes
27 Methodology
A mixed start in the first quarter confirms our expectation that macroeconomic
pressures will hold global technology M&A activity to flat or slow growth in
2012. But the fact that technology M&A is off to a much stronger start than
in most other industries demonstrates that the disruptive megatrends of
social-mobile-cloud and big data analytics continue to drive strategic
transactions and enabling innovation throughout the global economy.
Joe Steger
Global Technology Industry
Transaction Advisory Services Leader
Ernst & Young
4
Ernst & Young has identified five
long-term megatrends that are
generating disruptive innovation in
technology and leading to technology-
enabled innovation in other industries.
The five are smart mobility, cloud
computing, social networking,
big data analytics and a growing
sense of blur and convergence, as
technology sectors come together
and the technology industry
enters other industries as enabling
innovation. In addition, all five
megatrends are driving increased
information security requirements.
This report focuses on how these
megatrends continued to drive the
microcosm of global technology M&A
in 1Q12, as companies compete for
market share and key technologies.
2012 starts with a mixed quarter
Global technology M&A got off to a mixed start in the first quarter of 2012,
with deal volume slightly up YOY and aggregate value slightly down. But far
more important in terms of setting deal-making expectations for the rest of
the year was the diverse number of continuing and emerging trends that drove
deals in the quarter.
In 1Q12, companies across all sectors and
of all sizes continued to target technologies
related to the five long-term megatrends
weve identified: smart mobility, cloud
computing, social networking, big data
analytics and cross-sector and cross-industry
blur/convergence (plus, the increased
information security requirements that
accompany all of them). Smart mobility
shaped many 1Q12 deals, from various
patent acquisitions to the largest dollar-
value deal of the quarter (which included
software that relays video to mobile
devices). Cloud-based SaaS picked up
where it left off in 4Q11, driving the
second-largest dollar-value deal of 1Q12
and more than a hundred others. Social
networking and data analytics deals
continued to be prominent, as did deals
involving technologies for advertising
and marketing, health care IT, online
video, security, financial services and
electronic payments.
1Q12 by the numbers
Global technology M&A transaction volume
increased just 1% YOY and 5% sequentially
to 756 deals in 1Q12 while aggregate
disclosed value fell 12% YOY and 15%
sequentially to $25.1 billion (see Figure 3,
page 7). Average value per deal, however,
increased 42% YOY and 1% sequentially.
Typically, both aggregate and average
values decline in fourth-to-first-quarter
transitions, as they did in each of the
previous three years. We hypothesize that
quarterly volume and value have reached
a plateau, after growing strongly for three
years up from the bottom reached in the
first quarter of 2009 (caused by the global
downturn of 2007-2008). How long
deal-making remains at a plateau likely
will depend on macroeconomic variables
and the speed of disruptive innovation.
However, global technology M&A is off to
a stronger start than M&A in other industries.
According to published reports, M&A
aggregate value for all industries in 1Q12
was at the lowest level since 2003.
1
By
contrast, the global technology M&A
aggregate value cited above is well ahead
of 1Q09 and 1Q10.
PE value grows as corporate value falls
Although PE and corporate deal-making
generally grow and fall in unison, they
moved in opposite directions in 1Q12.
Corporate volume increased 2% to 702
deals in the quarter, while aggregate value
fell by 27% to $19.2 billion from $26.3 billion
in 1Q11. Meanwhile, PE volume fell 8% to
54 deals, while aggregate value soared
171% to $5.8 billion from $2.1 billion in
1Q11 (for a deeper look at whats behind
PE deal-making growth, see page 12).
Of note, 98% of PE aggregate value came
from just three big-ticket deals.
Cross-border deal value aligns with
overall trend
CB deal value for 1Q12 was $11 billion,
or 44% of the aggregate value for all deals
(CB plus IB). Sequentially, both CB and
all deal aggregate values fell by the same
15% (detailed looks into regional and CB
deal-making begin on page 14).
Biggest trends blur industry lines
The biggest stories behind 1Q12 deal-
making often involved multiple megatrends
and spanned several industries, as was the
case with a first-quarter surge in deals
targeting video technologies. In addition,
patent deals grew from isolated big-ticket
events in 2011 to a flow of deals in 1Q12;
big data analytics deals occurred in
contexts as diverse as health care and
advertising (and many in between);
Global technology M&A update: January-March 2012
Global technology M&A update: January-March 2012 5
Buyer name
Figure 1: Global top 10 deals, January-March 2012 (corporate and PE)
Disclosed
value ($m)
Deal type
Multiple
of TTM
EV/Revenue
Multiple
of TTM
EV/EBITDA
Premium
offered
Announced Status
Online and mobile video drove three of the top 10 deals in 1Q12 (Cisco-NDS Group, Youku-Tudou and SemTech-Gennum), while the rapid adoption of
SaaS was behind the Oracle-Taleo deal the second-largest deal of the quarter in dollar value. Vertical market deals for financial services technology
companies were prominent in the quarter; they were represented among the top 10 by the acquisitions of Misys, TransUnion and GlobeOp.
IT infrastructure management technologies were also popular targets in the quarter, but most such deals were small compared to Insights top 10
deal meant to take Quest Software private. Rounding out the top 10 deals are Amazon-Kiva, which brings robotic warehousing technology to the
e-commerce company, and NECs planned purchase of Convergys information management business, which provides products and services in support
of telecommunications companies business and operational support systems.
$5,000 15-Mar Pending Corporate x5.0 x17.5 N/A
$2,016 9-Feb Pending Corporate x6.2 x102.8 25%
$2,000 9-Mar Pending PE x2.2 x13.1 5%
$1,985 19-Mar Pending PE x3.5 x15.1 13%
$1,685 17-Feb Pending PE x3.1 x20.9 N/A
$1,131 12-Mar Pending Corporate x12.4 N/A 185%
$895 14-Mar Pending Corporate x3.6 x12.6 6%
$775 19-Mar Pending Corporate N/A N/A N/A
$495 23-Jan Complete Corporate x3.5 x14.1 124%
$449 22-Mar Pending Corporate x1.4 x8.4 N/A
Cisco Systems, Inc. to acquire NDS Group Ltd.
Oracle Corporation to acquire Taleo Corporation
Insight Venture Partners, LLC to acquire Quest Software, Inc.
in a management buyout
Vista Equity Partners to acquire Misys plc
Advent International and GS Capital Partners VI Fund, LP and
certain of its affiliates to acquire TransUnion Corporation from
its current stockholders, including Madison Dearborn Partners
and the Pritzker family business interests
Youku Inc. to acquire Tudou Holdings Ltd.
SS&C Technologies, Inc. to acquire GlobeOp Financial
Services S.A.
Amazon.com, Inc. to acquire Kiva Systems, Inc.
Semtech Corporation acquired Gennum Corporation
NEC Corporation to acquire the Information Management
business from Convergys Corporation
financial services drove three of the top 10
deals; and there was a noticeable change in
the character of social networking deals, at
least partially due to the greater capital
available to companies that had initial public
offerings (IPOs) last year.
Video drives deals in every
technology sector
Smart mobility and cross-industry
blur/convergence came together to help fuel
Ciscos $5 billion announced acquisition of
NDS Group the largest deal of the quarter
by dollar value. NDS provides pay television
networks with technology that leverages the
cloud to relay interactive video to mobile
devices, as well as to set-top boxes and
digital video recorders. Moving from the
communications equipment sector to the
internet sector, Chinas Youku ad-supported
online video site announced a $1.1 billion
deal to acquire rival Tudou. The merger is
expected to accelerate the companies efforts
to become profitable, as both are negotiating
a transition to licensed video content.
2
In the semiconductor sector, Semtech paid
$495 million to acquire Gennum, whose
chips enable video and other multimedia
content to be transmitted at high speed
over long distances.
3
Dozens of smaller
deals ranged across all the sectors, from
video surveillance systems in CPE to
video advertising data analytics and video
editing applications in software and a video
surveillance services provider in IT services.
There was even a patent deal: Intel
agreed to acquire video compression
and decompression patents and software
from RealNetworks, Inc., for $120 million.
6
Patent-related transactions on the rise
M&A to acquire intellectual property (IP)
particularly patents related to smart mobile
technology grew in volume during 1Q12
in the wake of major multibillion-dollar deals
in 2011. Most of the 1Q12 deals had no
disclosed value. Besides Intel-RealNetworks,
Facebook, Inc. acquired about 750 patents
from IBM, at least in part because of IP
lawsuits with Yahoo, Inc.;
4
Nokia Oyj sold
roughly 450 wireless and video encoding
patents to Sisvel International SA, an Italian
patent licensing company;
5
and Acacia
Research Corporation, another IP licensing
company, acquired Adaptix, Inc. in order to
obtain its 230 patents related to 4G broadband
wireless networking technology.
6
Only Acacia-
Adaptix had a disclosed value: $160 million.
Further, as we prepared this report in early
April, Microsoft Corporation announced
a $1.1 billion deal to buy basic internet
technology patents from AOL, Inc.
7
Increased demand appears to be driving up
patent value, which could cause the related
M&A trend to accelerate.
SaaS deals increase, too
Even though weve been writing about the
cloud megatrend for three years, it too
continues to accelerate as a deal-driving
force. In 1Q12, the largest dollar-value
cloud deals were for SaaS companies:
Oracles announced $2 billion acquisition of
Taleo, which offers workforce management
SaaS, and SS&C Technologies $895 million
deal for GlobeOp Financial Services, a
provider of hedge fund management SaaS.
Besides a multitude of smaller deals that
exemplify the rapid migration to SaaS, cloud-
related deals were seen in various sectors.
Good examples are Advanced Micro Devices
Inc.s $334 million completed purchase of
Seamicro, Inc., which makes low-power
servers for cloud data centers, and many
small data center acquisitions in the IT services
sector aimed at integrating or enhancing
cloud service capabilities. In all, we found
$5.6 billion in disclosed-value deals that
targeted cloud-related technologies.
1Q10 2Q10
Next 15
Top 10
$282b
$338b
$298b
$324b
$270b
$311b
$278b
$292b
$269b
$283b
$234b
$265b
$499b
$552b
$570b
$581b
$622b $620b
$295b
$345b
$640b
$294b
$345b
$639b
4%
-5%
0%
2%
5%
3%
0%
0%
0%
4%
10%
7%
7%
-3%
2%
3%
3%
3%
7%
15%
11%
4%
3%
2%
3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
$230b
$256b
$486b
Top 25 companies identified are based on average ranking of market value and sales as of 31 December 2011.
Note: numbers in above chart differ from published reports due to date Capital IQ database was accessed for this chart.
Source: Ernst & Young analysis of Capital IQ data, accessed xx April 2012.
Figure 2: Aggregate cash, short- and long-term investments of the top 25 technology companies, 2Q10 through 1Q12
Deals announced 1Q11 Sequential % change 1Q12
Figure 3: Global technology transactions scorecard, 1Q12
7
689 702 6% 2%
213 137 -12% -36%
$26,341 $19,282 -11% -27%
$124 $141 1% 14%
1Q 2Q 3Q 4Q 1Q
59 54 -11% -8%
21 8 -53% -62%
$2,144 $5,808 -27% 171%
$102 $726 56% 612%
Corporate and PE
Number of deals announced
Number of deals with disclosed values
Total value of deals with disclosed values ($m)
Average value of deals with disclosed values ($m)
748 756 5% 1%
234 145 -16% -38%
$28,484 $25,090 -15% -12%
$122 $173 1% 42%
PE
Corporate
Theres a roughly even distribution between increases and decreases among 1Q12 scorecard attributes, unlike most quarters of 2011 during which
technology M&A showed across-the-board growth off of lows from the last downturn. In terms of value, PE buyers started off stronger than last year with
171% growth in aggregate value and soaring average value per deal (+612%). But they did 8% fewer deals in the quarter. Corporate buyers, however, did
slightly more deals in 1Q12 (+2% YOY) but saw a 27% decline in the aggregate value of those deals. Both corporate and PE deal-making experienced
declines in the number of deals with disclosed value, a 36% decline for corporate and a 62% decline for PE.
YOY % change
Many smart mobility deals driven by
device management and payments
technologies
Smart mobility is one of those megatrends
that has affected every aspect of information
technology in recent years. Reviewing
transactions for 1Q12, mobile payment
technologies appeared prominent, exemplified
by deals such as UK-based Monitise plcs
$173 million plan to acquire Clairmail Inc.,
a US provider of mobile banking software,
and Oberthur Technologies SAs undisclosed
value deal for mobile payments software
company MoreMagic Solutions Inc. Oberthur,
a French maker of smart cards used for
payments and identity management,
was taken private last year by Advent
International in a $1.6 billion deal that
envisioned growth through future mobile
payment products.
8
Also driving smart mobile deals in 1Q12
was demand from enterprise customers
for technology to help them manage
and protect corporate information and
applications on the growing number of
mobile devices in employees hands
both company- and employee-owned. For
example, Symantec Inc. announced two
related deals: for Nukona, Inc. (non-
disclosed value), whose software enables
intra-enterprise application stores, and
Odyssey Software Inc. ($60 million)
which lets companies configure and deploy
smartphones.
9
We saw a plethora of other
deals targeting similar technology. In
addition, there were multiple smart mobile
deals targeting mobile technologies for
marketing, synchronization, gaming,
location services, music streaming
and more.
Aggregate value for PE deals
soars 171% YOY to
$5.8 billion
8
Big data drives many small deals
Approximately 50 1Q12 deals targeted
big data analytics technologies. Numerous
deals focused on general capabilities, such
as EMC Corporations non-disclosed value
deal for Pivotal Labs Inc., whose technology
reportedly accelerates the development
of enterprise data analytics applications.
10
But many more focused on analytics for
one of two specific industries: health care
IT or advertising/marketing the latter
particularly for mobile data. Exemplifying
the health care deals was a $349 million
offer by Verisk Analytics, Inc. for
MediConnect Global, Inc., which would
enable Verisk to broaden from fraud
detection and risk assessment software
and services primarily for the insurance
industry to the health care industry as
well. For advertising and marketing, SAS
Institute, Inc.s non-disclosed value deal for
aiMatch, Inc., which provides online, mobile
and video advertising campaign analysis,
was a prominent example.
Financial services, health care and
security drive many deals
Three of the top 10 deals of 1Q12 by
dollar value targeted financial services
technologies (see Figure 1, page 5),
driven in part by the increasing reliance
of financial institutions on certain
technologies.
11
Similarly, as technology-
enabled innovation (particularly around
smart mobile devices) emerges as a
growing force in health care, we saw a
rise in the number of health care-related
technology transactions. In 1Q12, deals
targeted medical billing software and
services, medical transcription technology,
electronic health record (EHR) management
and analytics. Among the most interesting
deals was the purchase of NaviNet, Inc. by
a combination of Lumeris, Inc. and three
large health insurance providers, for an
undisclosed value. Lumeris makes analytic
software that tracks procedures and patient
results for insurers and physicians, while
NaviNet provides medical practice, EHR,
The software and SaaS sector was the dominant net seller of technology M&A value in 1Q12, selling 46% of the aggregate disclosed value for the
quarter. Software companies themselves bought just 45% of that value, while PE firms purchased 35% in just two top 10 deals (see Figure 1, page 5).
CPE, which was one of three net buying sectors, also made the software sector a target: the top 4 deals by dollar value in which CPE companies were
the buyer targeted three software companies and an internet company.
The other two net buying sectors were internet and semiconductors. Interestingly, three of the semiconductor sectors top five deals by dollar
value were acquisitions of communications equipment companies and the other two were of semiconductor companies that make chips for data
transmission, including one for video. For the internet sector, one deal makes up the difference between value bought and sold: Amazons announced
$775 million deal for Kiva Systems, a maker of warehouse robots.
Note: dollar values may not add to totals due to rounding.
$25,000
$20,000
$15,000
$10,000
$5,000
$0
D
e
a
l

v
a
l
u
e

(
$
m
)
PE $5,808
Software/SaaS $5,164
Semiconductors $1,806
Non-tech $1,069
Internet $2,742
IT services $1,244
CE $5,768
CPE $1,490
6%
23%
11%
5%
7%
21%
4%
23%
$25,090m
Buyer
Software/SaaS $11,554
Semiconductors $1,030
Internet $2,060
IT services $2,408
CE $6,822
CPE $1,216
5%
27%
8%
10%
4%
46%
$25,090m
Target
Figure 4: Global technology transactions value flow by sector, 1Q12
prescription and claims management
SaaS. The combination of the two is
expected to enable deeper analytical
insights, including recommendations
and alerts for medical clinicians.
12
There were about 40 deals targeting
security technology in 1Q12, most with
small or non-disclosed values and many
involving securing mobile data or devices.
Of note, financial terms were not disclosed
for what was likely the largest security
transaction by dollar value: Dell Inc.s
announced deal for unified threat
management appliance and software
company SonicWall, Inc. was widely
reported to be valued around $1.2 billion
13
(but that amount is not included in value
data for this report, which is based on
disclosed values only).
Changing character of social
networking deals
Aside from Facebook, Inc.s $1 billion
pre-IPO deal for Instagram (which is not in
the data for this report as it was announced
a week after the end of the quarter),
14
Zynga Inc. and Groupon Inc. both appeared
to depart from past M&A strategies. Zynga,
which historically bought small game design
studios, did four small non-disclosed value
deals for mobile technology to help it
expand beyond Facebook-based social
games,
15
and also purchased social game
company OMGPOP Inc. for $180 million
six weeks after it released a hit new game.
16
For Groupon, whose deals historically
focused on geographic expansion, we
found six deals targeting primarily mobile
location-based payments and e-commerce
technologies, suggesting an evolving mobile
commerce strategy.
Global technology M&A rises to the
macroeconomic challenge
For the third consecutive quarter (since
macroeconomic uncertainty arose last
summer from sovereign debt crises in
many developed nations), global
technology M&A volume and value has
been more robust than that of all industries.
We take this as an indicator that disruptive
technology megatrends such as those
described in this report demand strategic
deal-making and will continue to do so
for the foreseeable future.
46%
of all disclosed value for the
quarter targeted software and
SaaS companies
Global technology M&A volume and value for 2012 is likely to end up similar to
that of 2011 which means it will probably continue to outpace M&A activity in
most other industries.
Last year saw robust technology M&A growth, particularly in terms of aggregate
value and deal valuations, despite the return of macroeconomic concerns that
appeared to slow deal-making in the second half. Based on the mixed but
relatively active start to 2012 represented by the first quarter (with volume
up slightly and aggregate value down slightly), our expectation is that global
technology M&A volume and value will continue at about the same levels
established in 2011: an average of roughly 730 deals and around $40 billion
in aggregate value per quarter. Additional macroeconomic turbulence could
further dampen M&A activity, but technology deal-makers, at least, appear to
have become accustomed to the new normal in that regard.
Look for the following considerations to shape technology deal-making in the
next few quarters:
Valuations appear to be stabilizing, encouraging deal-making. But will volatility return?
PE deal-makers appear poised for more growth in 2012. If so, will increased competition
for deals drive values up?
Smart mobility drove big-ticket deals targeting mobile technologies last year; in 1Q12,
prominent deals involved technologies that use mobility as a platform, such as video,
payments and security. How will this megatrend evolve next?
Big-ticket SaaS deals occurred in each of the last two quarters, as did a plethora of
smaller deals our 1Q12 dataset felt like SaaS was everywhere. Will SaaS deal-making
predominate in 2012?
Big data deal momentum continued in 1Q12, but in smaller deals than seen last year.
Will big-ticket big data deals return?
How will the deal-making landscape change as more social networking companies go public
in 2012? Will we see an increase in social networking company acquisitions?
Will technologys role in enabling innovation throughout the global economy continue to
support M&A activity, regardless of the economic environment?
10
Look ahead
Top of mind business issue
and regional snapshot
12 Top of mind:
increasing PE activity alters the technology
M&A landscape
14 Regional snapshot:
14 Americas
16 Asia-Pacific and Japan
18 Europe, Middle East and Africa (EMEA)
Throughout the global economy, companies
are growing more dependent on technology-
enabled innovation every year. That fact is
attracting more PE firms to technology
deals and driving up PEs share in global
technology M&A and changing the overall
deal-making landscape, as well.
A recent Ernst & Young private equity
report put it this way: As technology
plays an ever-increasing role across most
sectors and technology companies increase
in maturity, PEs interest has expanded.
The sector now boasts thousands of
companies that are well suited to the buyout
model: many are highly cash generative,
profitable and operate in niches with
growth potential that far outstrips that
of the wider economy.
17
Rodney Grebe, Transaction Advisory
Services, Ernst & Young LLP, adds, Private
equity firms love to invest in companies
that customers cant easily walk away from.
You cant just turn off your database, you
cant just stop hosting your software or turn
off your website.
Multiple factors support PE growth in
technology M&A
PE deal-making plummeted in the two years
immediately following the global downturn
that began in late 2007. However, in recent
months, global technology M&A PE has
returned to 2007 levels since hitting
bottom in 2009, and further growth
appears likely (see chart, page 13). This is
not the case for PE activity in all industries,
which declined in 2011 according to an
Ernst & Young report.
18
Three key factors
currently are driving PE interest in
technology deals:
The growing role of technology
throughout the global economy
Improving earnings predictability that
helps to stabilize valuations
PE firms ability to help companies mature
financially and operationally
Technologys growing economic role
Although macroeconomic concerns hold
back PE deal-making in many industries,
they are a key reason for PEs growing
interest in technology companies. At a
high level, the global economy is at a point
where demand is not increasing to a large
extent. So for any company to achieve
earnings growth, they need to rely on
either innovation to drive new demand or
efficiency to reduce expenses. This usually
requires technology-enabled solutions,
explains Rodney. As a result, technology
companies often grow very fast coming
out of a recession.
Improved earnings predictability
But technologys increasingly important
role in the global economy is not enough,
by itself, to spur PE deal-making. Improved
earnings predictability is also a factor.
Despite the fact that equities markets
remain volatile, earnings predictability has
steadily improved since the early days of the
recent downturn, when customer demand
was falling. More stable earnings forecasting
helps stabilize valuations, despite short-
term equities markets volatility. PE firms
like that consistency, says Rodney.
Improving financial and
operational controls
Finally, there is a ready market for one of
the things PE firms do best: help companies
mature from an operational and financial
controls perspective so that they are more
attractive to established corporate buyers.
For example, Permira Advisors LLP was a
co-owner of NDS Group, which sold to Cisco
Systems in the largest dollar-value deal of
1Q12 (see Figure 1, page 5).
Rising PE activity is changing the
technology M&A landscape
Given these factors, PE firms that have
traditionally invested in technology
companies are increasing their activity, and
other PE firms are beginning to invest in
technology companies. This is affecting the
Rodney Grebe
Transaction Advisory
Services
Ernst & Young LLP
Rodney is the San Francisco leader of
Ernst & Youngs West Coast Transaction
Advisory Services Group. He has been
providing transaction services on a
dedicated basis for more than 19 years.
His clients have included some of the
largest private equity funds as well as
Fortune 500 corporations, assisting them
with complex acquisitions and divestitures.
Rodneys industry experience includes
high tech, software, business services,
consumer products, industrials and
financial services.
Top of mind
Increasing PE activity alters the
technology M&A landscape
Global private equity watch:
Striving for growth a return
to entrepreneurship, 2012,
Ernst & Young report
available now.
global technology landscape in two main
ways: it increases competition for deals
(which causes deal multiples to rise) and
provides a ready exit for corporate divesture
of non-core assets.
This may have contributed to average
value per deal remaining relatively flat
(+1%) sequentially in 1Q12 (see Figure 3,
page 7), whereas that metric historically
falls from fourth quarters to first quarters.
Of note, there have been several recent
examples where PE firms acquired divisions
that allowed companies to restructure.
The largest recent such deal was in
4Q11, when Permira acquired Genesys
Telecommunications Laboratories Inc.,
a subsidiary of Alcatel-Lucent SA, for
$1.5 billion. Other examples include The
Gores Group LLCs acquisition of the US
operations of Hypercom Corporation in
3Q11 (which came as a result of regulatory
requirements for VeriFone Systems Inc. to
complete its purchase of Hypercom) and
Platinum Equity LLCs 4Q11 purchase of
the Image Sensor Solutions Business of
Eastman Kodak Co. Neither of those deals
had a disclosed value.
Enterprise software, cloud and big data
attract PE deal-makers
Companies that are particularly attractive
to PE deal-makers due to current market
dynamics include enterprise software and
SaaS companies especially in the financial
and health care markets companies
that support cloud-based solutions and
big data companies.
Weve seen a lot of activity coming out
of enterprise software, says Rodney.
Since companies are looking to technology
innovation to help them be more efficient
for cost savings, or to help them be more
effective getting revenue from incremental
demand, enterprise software is often a path
to one or both of those goals, he explains.
In 1Q12, two top 10 acquisitions involved
PE firms buying enterprise software
companies: Vista Equity Partners-Misys and
Insight Venture Partners-Quest Software
(see Figure 1, page 5). Misys serves the
financial services industry and Quest
provides IT infrastructure management
software applicable to most enterprises.
PE firms have especially high interest in
financial services and health care technology
companies, because both those industries
are growing particularly dependent on
technology-enabled innovation, according
to Rodney. In terms of the cloud, PE firms
are generally placing their bets on data
center companies and other solutions that
enable enterprises to leverage the cloud
with social networking companies being a
notable exception. A lot of companies in
social media have such high valuations that
it doesnt make sense for PE firms to focus
on the space, explains Rodney.
Unlocking big datas potential
PE firms interest in big data technologies
comes in two ways. Most straightforward
is software and SaaS companies whose
products enable enterprises to analyze their
data for better business insights. Second is
companies that possess large volumes of
data that may have unrealized analytical
potential. Rodney theorizes that another
top 10 deal, Advent International-
TransUnion, fits into the latter category.
TransUnion is a technology-enabled credit
reporting company that provides services
based on a large amount of data. If companies
with a large volume of data can use higher-level
big data analytical capabilities to make
their data more predictive, it would become
more valuable to more people, explains
Rodney. Unlocking that kind of value would
raise a companys earnings potential and,
therefore, its valuation which makes such
opportunities very interesting to PE firms.
Looking beyond the obvious
to technology
That second approach to big data deals
highlights another overarching thought
from the Ernst & Young PE report, which
encourages PE firms to look beyond the
obvious to find the most promising
businesses in the sectors that will underpin
economic growth. Such advice is yet
another factor that brings PE firms right
back to technology companies.
Figure 5: A look at PE engagement in technology deals over the past five years
2008 2009 2010 2011 2007
Share of aggregate annual deal value Average annual PE deal value ($m) Annual number of deals
$313
325
20%
$160
274
15%
$175
174
10%
$244
267
17%
$344
317
20%
Source: Global technology M&A update: October-December 2011 and year in review; Global technology M&A update:
October-December 2009 and year in review; and Global technology M&A update, July-December 2008.
The Americas region outperformed the
global averages for most attributes
displayed in Figure 7 on page 15, suggesting
that the region increased activity, while
other regions slowed. For example, comparing
Figure 7 with Figure 3 on page 7 shows that
Americas deal volume increased 4% YOY
and 10% sequentially, while global deal
volume increased 1% and 5%, respectively.
Likewise, global aggregate value declined
12% YOY and 15% sequentially, whereas
Americas aggregate value declined just 8%
YOY and increased 6% sequentially.
Only in YOY average value was the global
increase slightly better than the Americas
increase, 42% versus 41%, due to significant
growth in the Asia-Pacific and Japan region
(see page 16). Sequentially, however, the
average value per deal in the Americas
region grew 9% compared to 1% globally.
Americas deal-makers acquired a
disproportionate number of cloud/SaaS
companies: 84% of the cloud/SaaS deals we
saw were purchased by the regions buyers.
That includes the second-largest deal of the
quarter by dollar value, Oracles announced
$2 billion purchase of Taleo (see Figure 6,
page 15). In addition, Americas buyers
purchased nearly all (96%) of the health
care technology deals we saw in 1Q12,
which makes sense given the focus on
health care reform issues in the US.
Americas buyers bought slightly more than
three-quarters of the target companies
involved in social networking, big data
analytics and information security, though
just 69% in mobile application software.
The regions buyers were also focused on
internet and mobile video technologies in
1Q12 as exemplified by the largest deal of
the quarter, Ciscos announced $5 billion
purchase of NDS Group (see Figure 6).
NDS technology leverages the cloud to
relay interactive video to mobile devices,
set-top boxes and digital video recorders,
and represents an approach for pay
television network providers to deliver
content to any mobile- or internet-
connected device.
19
Rounding out the top five Americas deals
of 1Q12 are three PE deals targeting
enterprise software and financial services
(see Figure 6, page 15). Quest Software
provides IT infrastructure management
software, which enterprises are particularly
concerned about due to the consumerization
bring your own device (or BYOD) trend.
There were many more deals for similar
technologies, though most were very small
or had non-disclosed values. Misys provides
financial services software, and TransUnion
offers credit reporting services.
Of note, 8 of the top 10 deals of 1Q12 by
dollar value were done by US buyers and
four were CB acquisitions, including three
purchased from the UK. In fact, US buyers
accounted for 81% of all CB disclosed value
for the quarter. The US CB acquisitiveness
has been attributed to the high cost to
US companies of repatriating overseas
earnings, which makes it more efficient for
them to use such funds outside the US.
20
Americas deal-makers captured 75% of 1Q12 global deal volume and
87% of global aggregate value including all of the disclosed value
purchased by PE firms. The regions buyers were especially focused on
acquiring cloud/SaaS and health care technologies during the quarter.
Regional snapshot: Americas
Focus on cloud helps drive volume
and value growth
Technology trends like
SaaS and social agendas like
health care are fueling continued
deal-making growth in the
Americas region despite
macroeconomic uncertainty that
is putting downward pressure on
global deal-making.
Joe Steger
Global Technology Industry
Ernst & Young
US buyers announced
8 of the
top 10 deals
by dollar value in 1Q12
Figure 6: Top five Americas deals, 1Q12 (corporate and PE)
Buyer Disclosed Announced Deal type Premium
value ($m) offered
Cisco Systems, Inc. to acquire NDS Group Ltd. $5,000 15-Mar Corporate N/A
Oracle Corporation to acquire Taleo Corporation $2,016 9-Feb Corporate 25%
Insight Venture Partners, LLC to acquire Quest Software, Inc. in a management buyout $2,000 9-Mar PE 5%
Vista Equity Partners to acquire Misys plc $1,985 19-Mar PE 13%
Advent International and GS Capital Partners VI Fund, LP and certain of its affiliates to $1,685 17-Feb PE N/A
acquire TransUnion Corporation from its current stockholders, including Madison Dearborn
Partners and the Pritzker family business interests
Figure 7: Americas transactions scorecard, 1Q12
500 521 12% 4%
156 103 1% -34%
$22,410 $15,997 11% -29%
$144 $155 9% 8%
1Q 2Q 3Q 4Q 1Q
44 45 -10% 2%
15 8 -33% -47%
$1,402 $5,808 -5% 314%
$93 $726 43% 681%
Corporate and PE
544 566 10% 4%
171 111 -3% -35%
$23,812 $21,805 6% -8%
$139 $196 9% 41%
PE
Corporate
YOY % change
Note: premium offered data accessed via Capital IQ, 16 April 2012.
16
The regions volume and value scorecard
(Figure 9, page 17) showed mixed results.
At 33 deals, volume represented just 4% of
global deal volume and was down 33% YOY
and 39% sequentially. Aggregate value,
however, represented 8% of global value and
was up 26% YOY, though it declined 12%
sequentially. And average value per deal
increased significantly, 123% YOY and 37%
sequentially.
Of note, a 1Q12 deal whose value would
have raised these levels did not disclose
financial terms. Toshiba Corporation
acquired certain 3.5-inch hard disk
manufacturing assets from Western Digital
Corporation, and at the same time sold a
flood-damaged disk manufacturing facility in
Thailand to Western Digital.
21
The sale was
necessitated by conditions US and European
regulatory authorities placed on Western
Digitals acquisition of Hitachi Global
Storage Technologies Ltd., a $4.3 billion
deal announced in March 2011 that finally
closed in March 2012.
22
However, the top deals that did have
disclosed values illustrate the regions
alignment with key megatrends. Smart
mobility drove two of the top five deals by
dollar value (Figure 8, page 17), Singapore
Telecommunications-Amobee and RDA
Microelectronics-Coolsand. The Singapore
Telecom deal is an example of a non-
technology company buying mobile
advertising campaign management and
analytics software, thus expanding into
technology-enabled services with high
growth potential. RDAs target brings
baseband semiconductor intellectual
property (IP) to expand RDAs product line
of devices for mobile handset
manufacturers.
The largest deal by dollar value saw Chinas
top online video site, Youku, acquire its chief
rival, Tudou. Both companies have posted
losses as they transition from allowing
unlicensed content to focusing on licensed
content; the merger is expected to create
content licensing synergies.
23
SaaS and
global expansion were behind the SAI
Global-Compliance 360 deal, which brings
governance, risk and compliance (GRC)
management SaaS in the US to the
Australian buyer.
Expansion beyond a sluggish home economy
also motivated the planned purchase by
Japans NEC of the information management
business of US-based Convergys.
24
The
target provides business and operational
support system (OSS) software to network
operators. The acquisition is expected to
provide access to US customers for NECs
related equipment offerings.
25
The NEC deal was one of 10 regional deals
that targeted US buyers. For example,
Japanese buyers acquired only one domestic
target, five US targets, three in India and
one in Argentina. Aggressive cross-border
M&A by Japanese companies, encouraged
by the countrys strong currency,
26
was seen
in other industries last year but until 1Q12
had not been as visible in technology M&A.
But other countries in the region also
focused on overseas targets. In fact,
China/Hong Kong was the only one of four
countries in the region with more than one
deal that had more domestic targets (four)
than out-of-region (two, one each in the US
and UK). Of other countries with more
than one deal, India had two domestic
targets out of six deals and Australia had
one out of four.
Deal-making in Asia-Pacific and Japan in 1Q12 focused mostly on
strategic technologies such as online video, SaaS, mobile advertising
and application development for mobile platforms. Geographic
expansion was also prevalent, as roughly two-thirds of deals involved
out-of-region targets.
The Asia-Pacific regions focus
on strategic social-mobile-cloud
technologies and out-of-region
targets shows strong execution
on a desire to gain market
share in the fastest-growth
technologies all over the world.
Lin Cai
Technology Transaction
Advisory Services Leader
Asia-Pacific
Regional snapshot: Asia-Pacific and Japan
Deal volume declines, focus shifts
to out-of-region targets
value ($m) offered
Youku Inc. to acquire Tudou Holdings Ltd. $1,131 12-Mar Corporate 185%
NEC Corporation to acquire the Information Management business from $449 22-Mar Corporate N/A
Convergys Corporation
Singapore Telecommunications Ltd. to acquire Amobee, Inc. $321 5-Mar Corporate N/A
RDA Microelectronics to acquire the baseband intellectual property assets of Coolsand $46 26-Mar Corporate N/A
Holding Co. Ltd.
SAI Global Limited acquired Compliance 360, Inc. $42 12-Jan Corporate N/A
Figure 9: Asia-Pacific and Japan transactions scorecard, 1Q12
49 32 -40% -35%
16 9 -36% -44%
$1,625 $2,046 -12% 26%
$102 $227 37% 123%
1Q 2Q 3Q 4Q 1Q
0 1 0% N/A
0 0 N/A N/A
$0 $0 N/A N/A
$0 $0 N/A N/A
Corporate and PE
49 33 -39% -33%
16 9 -36% -44%
$1,625 $2,046 -12% 26%
$102 $227 37% 123%
PE
Corporate
YOY % change
Figure 8: Top five Asia-Pacific and Japan deals, 1Q12 (corporate and PE)
Average deal value increases
123% YOY,
far more than any other region
18
The peaks and valleys representing the
rise and fall of EMEA aggregate and
average values are clearly seen in the
lowest two micro plot lines on Figure 11,
page 19. For 1Q12, aggregate value
purchased by EMEA companies fell 52%
YOY and 82% sequentially, while average
value per deal fell 23% YOY and 67%
sequentially. These are far below the
global results (Figure 3, page 7), in
which aggregate value fell 12% YOY and
15% sequentially, and average value
increased by 42% YOY and 1%
sequentially. EMEA deal volume fared
better: its 1% YOY growth matched the
global average. And, at 3%, its sequential
growth was only slightly behind the 5%
global figure.
At 157 deals, EMEA volume represented
21% of global volume. But EMEAs $1.2
billion in disclosed aggregate value was just
5% of global aggregate value. The regions
three most acquisitive countries were the
UK (25% of deals), France (17%) and
Germany (14%).
Among the most prominent deal drivers
were cloud computing, mobile applications,
social networking, big data analytics and
information security. Of these, smart
mobility is best represented among the top
five deals of the quarter by dollar value
(Figure 10, page 19). Monitise, for
example, is a UK mobile banking start-up
that announced a plan to buy US-based
Clairmail, which provides mobile banking
and payments services in the US. In the
iEnergizer-Aptara deal, the target brings
technology for converting content to mobile
e-book formats. And the Aegis-Roundarch
deal is one in which a traditional marketing
agency is purchasing an agency focused on
online marketing technology, including
mobile web design and optimization.
Rounding out the top five deals are two
oriented around industrial applications. The
Siemens-RuggedCom deal brings network
infrastructure equipment designed for use
in challenging environments, especially
electric power stations and smart grids. And
Datalogics completed purchase of Accu-
Sort provides radio frequency identification
(RFID) hardware and related software for
use in warehouse management applications.
A bigger story in terms of value, however,
involved out-of-region companies buying
EMEA companies. Three of the global top
10 deals by dollar value involved US
corporate or PE buyers and UK targets.
These included the largest deal of 1Q12:
Ciscos announced $5 billion purchase of
NDS Group to obtain its online video
technology that enables pay television
networks to relay video to a variety of
mobile and stationary devices. The other
two were Vista Equity Partners $2 billion
deal for Misys, which provides software for
financial services companies, and SS&C
Technologies $895 million deal for GlobeOp
Financial Services, which provides hedge
fund management SaaS.
These deals were part of a larger 1Q12
trend in which the value of US acquisitions
of European targets was up about 63% YOY
for all industries, even though deal-making
in general was much slower YOY.
27
The
increased activity was attributed to the
large cash balances held abroad by US
companies and the expectation that
European markets are ready to improve.
28
As Europe struggles to emerge from its economic malaise, quarterly global
technology M&A value purchased by companies in Europe, the Middle East
and Africa (EMEA) have been alternately rising and falling over the past
year and 1Q12 was a down quarter. Perhaps the biggest story for EMEA
transactions this quarter was how US buyers announced big-ticket deals
targeting European technology companies.
Regional snapshot: Europe, the Middle East and Africa (EMEA)
Deal values fall; other regions target
EMEA companies
The European economic
malaise held back the regions
deal-makers in the first quarter,
but the way out-of-region buyers
targeted European companies
shows just how vibrant the
development of strategic social-
mobile-cloud and big data
technologies really is in EMEA.
Staffan Ekstrm
EMEIA
Figure 11: Europe, Middle East and Africa transactions scorecard, 1Q12
140 149 4% 6%
41 25 -36% -39%
$2,306 $1,239 -75% -46%
$56 $50 -60% -11%
1Q 2Q 3Q 4Q 1Q
15 8 -20% -47%
6 0 -100% -100%
$742 $0 -100% -100%
$124 $0 -100% -100%
Corporate and PE
155 157 3% 1%
47 25 -43% -47%
$3,048 $1,239 -82% -59%
$65 $50 -67% -23%
PE
Corporate
YOY % change
Figure 10: Top five Europe, Middle East and Africa (EMEA) deals, 1Q12 (corporate and PE)
value ($m) offered
Siemens AG acquired RuggedCom, Inc. $381 30-Jan Corporate 37%
Monitise plc to acquire Clairmail, Inc. $173 26-Mar Corporate N/A
iEnergizer Ltd. acquired Aptara, Inc. $150 8-Feb Corporate N/A
Datalogic S.p.A. acquired Accu-Sort Systems, Inc. $135 20-Jan Corporate N/A
Aegis Group plc to acquire Roundarch, Inc. $125 22-Feb Corporate N/A

21%
of global volume was purchase
by EMEA buyers
Appendix of additional charts
22 Global technology corporate and PE transactions scorecard by sector
23 Cross-border corporate and PE transactions scorecard by sector
24 Global corporate and PE deals by acquiring country: cross-border
and in-border
25 Cross-border deal value flow for technology deals
22
4 5 -17% 25%
8 4 -33% -50%
15 4 -67% -73%
13 15 15% 15%
3 4 300% 33%
16 22 -4% 38%
59 54 -11% -8%
Figure 12: Global technology corporate and PE transactions scorecard by sector, 1Q12
Though overall volume and value metrics increased both YOY and sequentially on the bottom line of Figure 12, above, there was noticeable volatility
from sector to sector and within the PE section of the chart. Volatility in PE volume and value was primarily due to the relatively small number of PE
deals, which caused small variations to result in large percentage changes.
Overall (corporate and PE) deal volume trended up sequentially in all sectors except software and SaaS, which experienced a spike in the preceding
quarter (as shown by the sectors volume micro-plot line in the chart). YOY, internet deal volume was down 20% but is roughly flat with all the quarters
since 1Q11. The only other sector with a YOY volume decline was semiconductors, which appears to have taken a pause in 1Q12 following a full year of
big-ticket (and small-ticket, too) consolidation deals in 2011.
On the average value side of the chart, big jumps in communications equipment and software and SaaS have different drivers. For CE, its mostly
one deal: Ciscos announced $5 billion deal for NDS Group (see Figure 1, page 5). Theres a more broad-based driver behind the increase in average
value for software and SaaS, namely the rise of big-ticket SaaS acquisitions. The rise in internet sector YOY average value is due to the $1.1 billion
Youku-Tudou deal.
Note: average value based on deals with disclosed values.
Number of deals
1Q11
Sequential
% change
1Q 2Q 3Q 4Q 1Q
$68 $398 113% 485%
$452 $117 234% -74%
$85 $169 125% 99%
$181 $34 -26% -81%
$265 $86 -81% -68%
$51 $116 -28% 127%
$124 $141 1% 14%
1Q12
YOY %
change
Average value ($m)
1Q11
Sequential
% change
1Q 2Q 3Q 4Q 1Q 1Q12
YOY %
change
$85 $24 -96% -72%
$72 $49 -89% -32%
$127 $31 -97% -76%
$86 $1,685 1,930% 1,859%
$223 $0 -100% -100%
$45 $1,332 318% 2,860%
$102 $726 56% 612%
34 42 20% 24%
36 45 15% 25%
173 139 1% -20%
166 192 19% 16%
36 27 17% -25%
303 311 -4% 3%
748 756 5% 1%
$70 $359 26% 413%
$357 $111 -1% -69%
$94 $158 -25% 68%
$172 $109 118% -37%
$261 $86 -82% -67%
$51 $170 1% 233%
$122 $173 1% 42%
Corporate deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
PE deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
Total deals by sector
CE
CPE
Internet
IT services
Semiconductors
Software/SaaS
Total
30 37 28% 23%
28 41 24% 46%
158 135 7% -15%
153 177 19% 16%
33 23 5% -30%
287 289 -4% 1%
689 702 6% 2%
Total deal volume trended up sequentially in all but one sector; average value results were mixed
Figure 13: Cross-border corporate and PE transactions scorecard by sector, 1Q12
CB deal volume was sequentially flat in 1Q12, with just one less deal than in 4Q11 (236 versus 237). That halts a two-quarter slide (as shown by the
micro plot line above) that followed an 18-month growth trend that peaked in 2Q11. However, since overall (CB plus IB) deal volume increased 5%
sequentially (see Figure 3, page 7), CB volume dropped to 31% of all deals in 1Q12 from 32% in 4Q11 and 34% for full-year 2011.
Despite falling 1% sequentially, CB average value per deal continued to hold up better than overall (CB plus IB) average value in 1Q12, as suggested by
the 187% YOY growth shown above. As seen in Figure 3 on page 7, overall average value peaked in 3Q11 at $302 million per deal; the 1Q12 average
value of $173 million is 43% less. CB average value peaked in 2Q11 at $317 million, and the 1Q12 average of $204 million seen above is down 36% from
that peak.
Because US companies acquired 81% of all CB value in 1Q12 (see Figure 15, page 25), a key factor supporting high CB valuations may be the US policy
that taxes repatriated earnings at 35%. Of note, in an article referencing Ciscos $5 billion announced acquisition of UK-based NDS Group, Cisco CEO John
Chambers was cited as saying his company will continue investing its cash abroad until the US reduces the penalty for repatriating that cash.
29
Note: average value based on deals with disclosed values.
0 2 100% N/A
3 1 0% -67%
2 0 -100% -100%
4 4 300% 0%
1 0 -100% -100%
5 4 100% -20%
15 11 22% -27%
Number of deals
1Q11
Sequential
% change
10 20 25% 100%
9 19 58% 111%
52 29 -9% -44%
48 41 -15% -15%
19 10 25% -47%
95 106 -5% 12%
233 225 -1% -3%
1Q 2Q 3Q 4Q 1Q
$82 $779 195% 850%
$31 $45 1,400% 45%
$89 $125 67% 40%
$92 $38 31% -59%
$72 $139 42% 93%
$63 $82 -56% 30%
$73 $180 21% 147%
1Q12
YOY %
change
Average value ($m)
1Q11
Sequential
% change
1Q 2Q 3Q 4Q 1Q 1Q12
YOY %
change
10 22 29% 120%
12 20 54% 67%
54 29 -17% -46%
52 45 -8% -13%
20 10 11% -50%
100 110 -4% 10%
248 236 0% -5%
$82 $611 131% 645%
$31 $45 1,400% 45%
$89 $125 -71% 40%
$88 $38 23% -57%
$72 $139 -37% 93%
$61 $145 -34% 138%
$71 $204 -1% 187%
Total deals by sector
CE
CPE
Internet
IT services
Semiconductors
Software
Total
PE deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software
Total
$0 $24 N/A N/A
$31 $0 N/A -100%
$0 $0 -100% N/A
$12 $0 -100% -100%
$0 $0 -100% N/A
$16 $998 27% 6,138%
$22 $511 -42% 2,223%
Corporate deals by sector (based on target sector)
CE
CPE
Internet
IT services
Semiconductors
Software
Total
Total cross-border deal volume and average value was flat, sequentially
24
The US continued its dominance of corporate CB deal volume in 1Q12 its 98 corporate CB deals represented 44% of all corporate CB deal volume for
the quarter. At 20%, however, the US has the lowest percentage of CB deals as a share of all deals among all top 10 countries. The UK remained in its
traditional number two spot in 1Q12. Of note, Japanese companies made eight out of nine deals across borders in 1Q12, likely a result of an advantage
coming from the countrys strong currency. Also, China fell to the 10th position among the most acquisitive companies in 1Q12, after being near the
top of the list for most of 2011.
For PE firms, CB deal-making fell to 20% of all PE deals in 1Q12, down from about 24% for full-year 2011. By comparison, corporate CB deals were 32%
of all deals in 1Q12, down from 35% for full-year 2011.
*Additional countries with one PE deal in 1Q12: British Virgin Islands, Israel, Japan and Netherlands.
Note: percentages may not total 100 due to rounding.
Figure 14: Global corporate and PE deals by acquiring country: cross-border and in-border, 1Q12
PE deals 1Q12
Top 10 countries 1Q11 deals 1Q 2Q 3Q 4Q 1Q 1Q12 deals % total deals No. IB deals 0% 50% 100% No. CB deals
US 42 42 78% 38 4
UK 7 3 6% 1 2
Germany 2 3 6% 2 1
Cananda 3 2 4% 1 1
Other 5 4* 7% 1 3
Total 59 54 100% 43 11
Corporate deals 1Q12
Top 10 countries 1Q11 deals 1Q 2Q 3Q 4Q 1Q 1Q12 deals % total deals No. IB deals 0% 50% 100% No. CB deals
US 466 487 69% 389 98
UK 48 36 5% 16 20
Canada 28 31 4% 15 16
France 25 26 4% 15 11
Germany 18 19 3% 10 9
Sweden 6 11 2% 1 10
Japan 5 9 1% 1 8
Netherlands 5 8 1% 2 6
Spain 0 6 1% 4 2
China/Hong Kong 14 6 1% 4 2
Other 74 63 9% 20 43
Total 689 702 100% 477 225
Total CB deals were down slightly as US continued its dominance of CB deal volume
Figure 15: Cross-border deal value flow for technology deals (disclosed value), 1Q12 versus 4Q11
0%
20%
40%
60%
80%
100%
CB value sold
$11b
Asia-Pacific 1%
Europe
75%
US
14%
Other 3%
Canada 8%
Other 2%
CB value acquired
$11b
Japan 4%
Asia-Pacific 3%
Europe
9%
US
81%
CB value sold
$13b
Europe
27%
US
44%
Asia-Pacific
19%
Canada 10%
Other
19%
India 1%
Japan
17%
Europe
43%
US
20%
CB value acquired
$13b
0%
20%
40%
60%
80%
100%
The sequential decline in aggregate deal value flowing across borders was 15% from 4Q11 to 1Q12, the same percentage decline as in all-deal (CB
plus IB) value. As a result, CB deal value was 44% of all aggregate value for both quarters. But there was one big sequential difference: Europe became
far-and-away the worlds biggest net seller in 1Q12 and the US became the biggest buyer, switching positions from 4Q11.
71% of CB value was tied to just three deals: Cisco-NDS Group ($5.0 billion), Vista Equity-Misys ($2.0 billion) and SS&C Technologies-GlobeOp
Financial Services ($895 million). Of note, all three deals involved US buyers and UK targets. The three deals accounted for 95% of European value
sold and 88% of US value acquired.
Intra-European CB deals accounted for 11% of the 1Q12 European total. The remaining 89% of European value sold went to eight buyers in the US and
Canada, including the three previously mentioned deals.
Despite being the leading acquirer region by value in 4Q11, Europe focused on smaller company deals in 1Q12, most with no disclosed value.
Canada was again a net seller with two deals Semtech-Gennum ($495 million) and Siemens-RuggedCom ($381 million) accounting for 97% of
Canadian value sold.
Japan was a net buyer with just one disclosed-value CB deal, NECs $449 million announced purchase of US-based Convergys.
Note: percentages may not total 100 due to rounding.
4Q11 1Q12
Europe was the biggest net seller and US the biggest buyer in CB deals
1
Bankers Await Rebound in Mergers, The Wall
Street Journal, 2 April 2012, via Dow Jones
Factiva, 2012 Dow Jones & Company, Inc.
2
Chinese Video Firms Cue Up a Deal Youku
Plans to Acquire Chief Competitor, Creating a
Force in Online Category, The Wall Street Journal,
13 March 2012, via Dow Jones Factiva, 2012
Dow Jones & Company, Inc.
3
Semtech to buy Gennum for $494 million, EE
Times Europe, 24 January 2012, via Dow Jones
Factiva, 2012 European Business Press SA.
4
Corporate Watch, The Wall Street Journal,
5
Nokia Sells Wireless Patents to Italian Holding
Company, Computerworld UK, 13 January 2012,
via Dow Jones Factiva, 2012 IDG Inc.
6
Acacia Research buys 4G technology developer
for $160 mln, Reuters News, 13 January 2012,
via Dow Jones Factiva, 2012 Reuters Limited.
7
Tech Patents Soar in Value, The Wall Street
Journal, 10 April 2012, via Dow Jones Factiva,
2012 Dow Jones & Company, Inc.
8
Global technology M&A update: July-September
2011, Ernst & Young 2011.
9
Symantec Deals for Nukona Odyssey Grow Its
BYOD Capabilities, eWEEK, 20 March 2012, via
Dow Jones Factiva, 2012 Ziff Davis Enterprise
Holdings Inc.
10
EMC buys app development management firm
Pivotal Labs, Computerworld, 21 March 2012,
via Dow Jones Factiva, 2012 Computerworld Inc.
11
Filling the IT skills gap in financial services
(26 August 2011), finextra.com website,
http://www.finextra.com/community/fullblog.aspx
?blogid=5701, accessed April 2012.
12
John Doerrs Patient Health Care Start-Up Gains
Momentum, NYT Blogs, 14 February 2012, via
Dow Jones Factiva, 2012 The New York Times
Company.
13
Dell To Buy IT-Security Company As It Builds
Software Arm, Dow Jones Business News,
14
Facebook Buys Instagram for $1 Billion, NYT
Blogs, 9 April 2012, via Dow Jones Factiva,
2012 The New York Times Company.
15
Zynga Buys Four Mobile Gaming Companies,
Reuters News, 18 January 2012, via Dow Jones
Factiva, 2012 Reuters Limited.
16
Zynga Buys OMGPOP, Maker of Draw
Something, Investors Business Daily,
21 March 2012, via Dow Jones Factiva,
2012 Investors Business Daily.
17
Global private equity watch: Striving for growth
a return to entrepreneurship, 2012, Ernst & Young.
18
Ibid.
19
Cisco Pumps up Video Offering with $5 bln NDS
Buy, Reuters News, 15 March 2012, via Dow
Jones Factiva, 2012 Reuters Limited.
20
Cisco CEO Wary of Huawei, The Wall Street
2012, Dow Jones & Company, Inc.
21
Toshiba swaps flood-soaked Thai plant for WD
disk biz, The Register, 29 February 2012,
2012 The Situation Limited.
22
Western Digital Closes Hitachi GST Acquisition, to
Operate Separate Subsidiaries, PCWorld Business
Center, 9 March 2012, 2012 PCWorld
Communications, Inc.
23
Chinese Video Giant Youku to Acquire Rival
Tudou, The Wall Street Journal Online, 12 March
2012, 2012 Dow Jones & Company, Inc.
24
NEC to buy Convergys business support ops for
$450 million, Reuters, 22 March 2012, via Dow
Jones Factiva, 2012 Reuters Limited.
25
Ibid.
26
Japan Turns Aggressive in M&A, The Wall Street
Journal Asia, 14 December 2011, via Dow Jones
Factiva, 2011 Dow Jones & Company, Inc.
27
Cross-Market Commentary: U.S. Companies Seek
Acquisition Targets In Europe, Standard & Poors,
21 March 2012, 2012 Standard & Poors
Financial Services LLC.
28
Ibid.
29
Cisco CEO Wary of Huawei, The Wall Street
2012 Dow Jones & Company, Inc.
Source notes
26
Global Technology M&A update: January
March 2012 is based on Ernst & Youngs
analysis of The 451 Group M&A
Knowledgebase data for 2011 and 2012.
Deal activity and valuations may fluctuate
slightly based on the date the database
is accessed.
Technology company M&A data was pulled
from The 451 Group M&A Knowledgebase
based on the databases own classification
taxonomy and then deals were aligned to
the following sectors: computers,
peripherals and electronics; communication
equipment; semiconductors; software and
SaaS; IT services; and internet companies.
Alignment was based on the sector of the
target company.
The data includes M&A transactions
between two technology companies
as well as non-technology companies
acquiring technology companies.
Joint ventures were not included.
Corporate M&A activity data was analyzed
based on the sector classification of the
target company. In previous years we
reported based on the classification of the
acquiring company; the change enables
a clearer picture of the technologies being
focused on for acquisition.
Equity investments that involved less than
a 50% stake were not included in the data.
PE M&A activity includes both full and
partial stake transactions in excess of 50%
and was analyzed based on acquisitions
by firms classified as private equity,
sovereign wealth funds, investment
holding companies, alternative investment
management groups, certain commercial
banks, investment banks, venture capital
and other similar entities.
Unsolicited technology deal values were
not included in the dataset, unless the
proposed bid was accepted and the deal
closed based on data available at the time
of analysis.
The value and status of all deals
highlighted in this report are as of
31 March 2012, unless otherwise noted.
All dollar amounts are in US dollars,
unless otherwise indicated.
As used in this report, total value refers
to the aggregate value of deals with
disclosed values for the period under
discussion.
As of this report cycle (1Q12),
Ernst & Young switched from using the
FactSet Mergerstat to The 451 Group
M&A Knowledgebase database to obtain
its technology M&A data for analysis. We
want to assure our readers that this
change in databases does not impact the
content in our report, which remains
directionally correct as always, even
though the databases are not technically
comparable.
Methodology
Ernst & Young
Assurance | Tax | Transactions | Advisory
2012 EYGM Limited.
All Rights Reserved.
EYG no. DCXXXX No expiry.
This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a
substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global
Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result
of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.
In line with Ernst & Youngs commitment to
minimize its impact on the environment, this
document has been printed on paper with a
high recycled content.
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About Ernst & Youngs Global
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The technology industry is in a constant
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Name Telephone number Email
Global Technology Center contacts
Transaction Advisory Services (TAS) key global technology c ontacts
Pat Hyek
Global Technology Industry Leader
+1 408 947 5608 pat.hyek@ey.com
Guy Wanger
Deputy & Americas +1 650 802 4687 guy.wanger@ey.com
Technology Industry Leader
Joe Tsang
Asia-Pacific +86 10 5815 2902 joe.tsang@cn.ey.com
Technology Industry Leader
Lisa Portnoy
EMEIA Technology Industry Leader
+1 408 947 6860 lisa.portnoy@ey.com
Yuichiro Munakata
Japan Technology Industry Leader
+81 3 3503 1528 munakata-ychr@shinnihon.or.jp
Joe Steger
Global Technology Industry +1 408 947 5488 joseph.steger@ey.com
Transactions Advisory Services Leader
Jeff Liu
Group Head, US Technology +1 408 947 5588 jeffrey.liu@ey.com
Lead Advisory, M&A
Erika Schraner
Americas Technology Operational
Transaction Services Leader
Juan Higueros
Global Technology Transaction
Advisory Services Resident
Lin Cai
TAS Area Leader, Asia-Pacific
Staffan Ekstrm
TAS Area Leader, EMEIA
Satoshi Sekine
TAS Area Leader
Japan
Dr. Carsten F. Risch
Germany
Ashish Basil
India
Stephan Lauers
The Netherlands
Neil Hutt
United Kingdom
Simon Pearson
United Kingdom
Increasing PE activity alters the technology M&A landscape subject matter professional
Rodney Grebe +1 415 894 8207 rodney.grebe@ey.com
+1 415 533 6669 erika.schraner@ey.com
+1 415 894 8535 juan.higueros@ey.com
+86 10 5815 3228 lin.cai@cn.ey.com
+46 8 520 593 90 staffan.ekstrom@se.ey.com
+81 3 4582 6696 satoshi.sekine@jp.ey.com
+49 30 25471 21426 carsten.risch@de.ey.com
+91 124 464 4590 ashish.basil@in.ey.com
+31 88 40 71368 stephan.lauers@nl.ey.com
+44 1189 281535 nhutt@uk.ey.com
+44 20 7951 0418 spearson@uk.ey.com

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