Nov 7th 2016

Was October the hottest month for M&A?

The 1st October marked the hottest day in the UK for over a century, with temperatures reaching 30°C in some areas. The past four weeks have also seen possibly the hottest month this year in terms of M&A activity in the tech sector.

Businesses across the globe are positioning themselves to take advantage of the IoT. M&A activity has reflected this: as demand for traditional chips has waned, buying out smaller companies with more specialised technology seems a logical decision, enabling incumbents to gain control over the production of the devices of tomorrow.

Qualcomm made headlines this week after announcing its intention to buy NXP Semiconductors for $38.5 billion. NXP’s chips can be used in connected devices, so the deal should allow Qualcomm to effectively extend its reach in the IoT market. In another IoT-related move, Broadcom looks ready to expand its chipmaking business by purchasing component manufacturer Brocade for $5.9 billion. Broadcom specialises in data storage, and the move will enable the company to create a strong fibre channel Storage Area Network (SAN) business.

The broadband sector has also experienced a fever of M&A activity, as traditional service providers seek to compete with disruptors and adapt to evolving consumer demands. Amalgamating content and distribution under a single entity with ready access to millions of subscribers, is a very appealing move. This was a step taken by AT&T, in the hottest deal of the month, and potentially of 2016. While still awaiting regulatory approval, the AT&T/Time Warner deal has the scope to create a telecoms behemoth.

Hot on the heels of this announcement was the news that US telco CenturyLink is to acquire networking business Level 3 Communications for around $34 billion, a merger which will help boost Level 3’s fibre network and expand its global footprint.

The deals are on the table, and in the press. The media loves an M&A story, but the level of activity in October cannot be put down to over-zealous reporting:  the heatwave of tech industry deals really seems to have a sunny outlook.

Political and financial uncertainties, sparked by Brexit, are usually reasons for CEOs to sit tight and avoid rash decisions. However, according to a recent study by EY, nearly two-thirds of technology executives (62%) see the tech M&A market holding steady and 29% expect improvements.

The technology industry itself is in a state of flux, with rapid advancements in technology disrupting the calm. So, perhaps rather than weathering current and underlying uncertainties, execs have taken the plunge and brokered deals which they are near-certain will benefit their businesses going forward. It will be interesting to see if the M&A heatwave continues through the year and how it impacts the wider technology and business markets.