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Tech executives find digital disruption spurs M&A

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Tech executives find digital disruption spurs M&A

37% of technology executives say digital disruption is driving their acquisition strategy

According to a recently-released bi-annual survey by professional services firm EY, digital disruption (technology innovation via mobile, social, cloud and big data analytics) is enabling and transforming all areas of business enterprise across all industries. M&A is one way for both tech and non-tech companies to keep up with innovation, and 80% of tech executives predict global M&A will thrive in the next 12 months.

Forty-five percent of technology industry executives plan to actively pursue acquisitions in the coming year, which is higher than the past three surveys launched in the same third-quarter period (44% in 2014, 33% in 2013 and 20% in 2012). With a single US$67b tech deal already announced in 4Q15, aggregate deal value has already hit another quarterly record.

More than one third (34%) of technology executives are also planning acquisitions outside their own sector.

More than one third (34%) of technology executives are also planning acquisitions outside their own sector. New customer behaviors are cited above all others (46%) in driving technology companies to buy non-tech companies, and new product innovation ranks second (21%), according to the report.

Jeff Liu, Global Technology Industry Leader, Transaction Advisory Services at EY, commented on that findings, saying "As the overall M&A market hits its stride, the technology sector has continued to shatter M&A records from one quarter to the next. While digital disruption is not a new story, we have clearly entered a new chapter in its impact on M&A. It is one in which the customer is becoming a more digitally empowered protagonist. Changing customer behavior is driving technology company acquisitions of non-technology companies — and vice versa."

According to the report, 80% are positive in their economic outlook. More than one third of technology executives surveyed (39%) view today's global economy as strongly improving and a similar number (41%) view it as improving modestly. Macroeconomic sentiment has swung significantly from last year, when stability (44%) was the rising indicator. Given economic growth in the US and European Union (EU) this year, executives have become less sensitive to daily speculation around such issues as an emerging market slowdown or the potential timing of a US interest rate hike.

However, technology executives also said that the deal process itself is subject to significant cyber risk, according to 91% of those surveyed. Cybersecurity due diligence has become standard practice for more than half of executives (54%).

Other key findings of the report include:

  • 96% see the size of their deal pipeline as stable or growing
  • 35% now cite R&D and product introductions as their primary focus for organic growth
  • 75% are bullish on corporate earnings



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