Global tech M&A remained resilient in H1 despite macroeconomic and geopolitical headwinds. A total of 3,369 announced deals valued at US$581.2 billion meant that tech was the most active sector in terms of both value and volume in the first half of the year. Not only that, this level of activity is the highest of any half-yearly period on Mergermarket record (since 2006), except for 2021.
Deal value was heavily driven by the top-end of the market. There were 16 megadeals (valued over US$5 billion) announced in the first half of 2022—this is already more than in any annual total except for 2020 and 2021. Activity has been concentrated at the very top end of the market, with two deals announced with a price tag of over US$70 billion announced in the first six months of the year.
Auto-tech convergence sparks deals
The integration of technology into the automotive sector continues to drive dealmaking within the technology sector. In April, Canadian investor Brookfield Business Partners announced the acquisition of US-based automotive retail technology firm CDK Global for the sum of US$8.2 billion.
CDK Global, which boasts an annual revenue of around US$2 billion, provides technology and software as a service (SaaS) solutions that help dealers and auto manufacturers run their businesses more efficiently, while creating frictionless purchasing and ownership experiences for consumers.
Another deal that reflects this digital shift in the automotive sector is US tech firm Aptiv’s purchase of Wind River, an intelligent edge software solutions provider, from US PE firm TPG Capital for US$4.3 billion in cash. The deal will take Aptiv one step closer to achieve its ambition of building safer, greener, and more connected solutions to accelerate the transition to software-defined, electric vehicles.
PE activity stays strong
PE activity within the global tech sector has remained exceptionally active. A total of 1,657 deals announced in H1 has already overtaken all annual totals expect 2021. Deal value, meanwhile, reached US$302.7 billion—the second highest H1 figure on record, following 2021.
The largest deal of the year saw an exit which saw US PE firm Silver Lake sell cloud computing firm VMware to Broadcom for the sum of US$71.6 billion. The deal indicates the US chipmaker’s ambition to become a diversified tech business, ranging from semiconductors to cloud computing. The industry-defining deal, however, looks set to face tough antitrust scrutiny.
US PE firm Thoma Bravo also secured two large tech deals in the first half of the year—announcing its US$10.3 billion purchase US business planning software company Anaplan in March, followed by the US$6.8 billion acquisition of US cybersecurity firm Sailpoint Technologies in April.
In June, it was reported that Thoma Bravo had successfully renegotiated a 3% reduction in the sale price of the Anaplan deal on the grounds that the software company had violated its merger agreement by overpaying new workers. The sharp drop in tech valuations in recent months was alleged to be a motivation behind the price renegotiation.
Gaming M&A heats up
The US continues to dominate global tech M&A activity, attracting nine of the top ten global tech deals of the year. The first half of the year saw the tie-up of two US gaming powerhouses: Take-Two’s US$12.2 billion acquisition of Zynga. The deal is aimed to help the newly combined company compete with traditional gaming firms such as Activision Blizzard and EA.
The US gaming industry is also attracting interest from overseas bidders. In January, Japanese tech powerhouse Sony’s acquired US gaming developer Bungie for the sum of US$3.6 billion. The deal is part of the companies aim to expand into the live service gaming sector.
Despite market fears surrounding falling valuations, geopolitical uncertainty, and rising interest rates, dealmaking within the global tech sector remained resilient in H1. While unlikely to overtake the record activity seen in a blockbuster 2021, dealmaking within the sector looks on track to reach the second-highest annual activity on Mergermarket history.
The fact that deal value was heavily bolstered by two deals with a value of over US$70 billion each highlights the attractiveness of megadeals within an uncertain economic climate. As seen in recent downturns, deals with a particularly high price tag tend to retain their value due to the strong strategic rationale behind the investment. The mid-market, on the other hand, is more likely to suffer.
Private equity activity also looks set to remain strong in the second half of 2021, underpinned by record levels of dry powder. Global buyout firms will be keen to put this money to work throughout the remainder of the year.
With these fundamentals driving activity, there is every reason to expect that tech M&A will continue to dominate global dealmaking during the second half of the year.