Ernst & Young: Cloud, SaaS dominating tech industry acquisitions

Rachel King| Zdnet

Plenty of new mergers and acquisitions in the tech industry are reported about on a daily basis, but the market has been dominated by cloud computing and Software-as-a-Service businesses, according to Ernst & Young. The global accounting firm has just published its fourth quarter and year-end report on the state of M&A in the technology sector, highlighting that the “megatrend” in favor of cloud and SaaS companies “ran away from the rest of the pack of deal-driving trends in 2012.”

Specifically, cloud and SaaS-related mergers was said to have accounted for more than 15 percent of global technology M&A deal volume in 2012. Examples of these deals include supply chain management, marketing and retail SaaS to cloud-oriented networking gear.

Analysts added that big data and analytics-related deals also saw an uptick, but it still didn’t compare quite as highly.

Overall, M&A deal value still declined over the course of the year by 35 percent worldwide to $114.1 billion from $175.7 billion in 2011.

While reflecting that most companies were “hesitant to engage in large, transformative technology deals because the uncertain macroeconomic environment increased many risks,” Ernst & Young researchers still said that deal volume “held steady” because they’re engaging in smaller transactions motivated by these “megatrends” such as cloud and mobility.

For the outlook, Ernst & Young analysts look even less optimistic, suggesting that the technology industry could be “approaching a near-term bottom.”

However, Joe Steger, a transaction advisory services leader at Ernst & Young, further explained in the report that there is still a “broad-based need” among larger technology corporations to buy up smaller companies with the expertise they need to accelerate adaptation to new trends and demands.

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