With deal volume and value doubling that of the previous quarter, technology deals accelerated in the third quarter returning to, and in some ways surpassing, 2012 levels after a very slow start to the year, according to PwC’s U.S. Q3 technology deals insights report.
With 63 transactions completed in the third quarter, the number of technology deals increased 97 percent compared to the second quarter, when only 32 deals were completed. Average deal value increased to $440 million, up from $253 million in the first quarter and $433 million in the second quarter of 2013. Deal value during the third quarter totaled $27.7 billion, doubling that of the second quarter. A total of eight transactions in excess of $1 billion closed.
The software sector bounced back to lead the charge in third quarter deal activity, comprising 38 percent of total deal volume and 45 percent of total deal value. Software deal volume tripled that of the second quarter and climbed to levels equal to those of 2011 and the first quarter of 2012, with 24 transactions closed. Deal value increased 716 percent compared to the low value of deals of the second quarter, but was still down 12 percent from a year ago.
Internet transactions remained flat and total deal value dropped as the third quarter saw only one deal in excess of$1 billion closed.
In contrast, private equity (PE) buyers took a more active role in technology M&A during the quarter with increased deal closures and numerous new deals announced.
“After a struggling start in the first of half of 2013, the third quarter demonstrated robust growth in both volume and value of closed deals, to put technology M&A on an upward trajectory toward a strong finish to 2013,” said Rob Fisher, PwC’s U.S. technology industry deals leader. “Additionally, there were a significant number of large deals announced during the quarter. Private equity funds are increasingly active in the technology sector, and with growth a constant focus for technology businesses, we anticipate the abundance of cash at home and overseas held by corporate acquirers to spur deals in the months and quarters to come.”
Volumes returned to 2012 levels with the number of deals relatively flat compared to a year ago, up five percent on volume and 34 percent on value due to the number of large transactions. Meanwhile, the volume of deals in excess of $250 million remained consistent with the second quarter of 2013 at 33 percent; there was also an increase in deals less than $50 million, which rose to 24 transactions in the quarter, the largest since the third quarter of 2011.
The report notes that the growth in the U.S. equities market fuelled additional technology IPOs, which remained on par with the second quarter, adding 14 new pricings with proceeds exceeding $1.3 billion. New publicly announced IPO registrations continued as well, totaling 20 for the quarter and likely a number of additional registrations confidentially filed under the rules of the U.S. JOBS Act.
The number of IT services deals doubled in the third quarter, and deal value increased 758 percent, driven by two deals in excess of $1 billion.
Hardware volume increased 25 percent, while value increased 77 percent to $5.0 billion due to a series of transactions in excess of $500 million closed during the quarter.
The report finds that private equity funds directly acquired a total of five companies in the third quarter and backed an additional 12 companies with acquisitions through wholly owned portfolio companies or via divestiture of an existing portfolio business. Private equity activity is on the rise and expected to continue at higher levels through the remainder of the year.
For last year’s coverage of Q3 technology deals, click here.
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