High-Tech M&A Trends in 2004: Analysis and Predictions

Strategic Insights -

As the Nasdaq surpasses 2,000, the Dow reaches 10,000, and capital expenditures by technology companies begin to increase, the stage is set for a healthier year in high-tech mergers and acquisitions (M&A) in 2004. With the emergence of a more viable initial public offering (IPO) market for profitable technology companies, venture capitalists, lawyers, investment bankers, and corporate executives can expect a resurgence in dealmaking.

Key Takeaways:

  • 10-figure deals will become more common, with 10 high-tech mergers and acquisitions worth over $1 billion expected in 2004, up from only 7 in the previous two years.
  • Second-tier technology companies such as CheckPoint Systems Inc. and Marvell Technology Group Ltd. will join industry giants like EMC Corp., IBM Corp., and Yahoo! Inc. in seeking out $1 billion-plus acquisitions.
  • IBM is expected to return to the M&A scene with two major deals, potentially targeting Novell Inc. or Sun Microsystems Inc.
  • Juniper Networks Inc. will cut a billion-dollar deal, possibly acquiring a wireless edge routing company, a metro ethernet company, or a big optical systems company.
  • European Union tech titans like SAP AG, Siemens AG, and Infineon AG of Germany will remain on the sidelines, with only small deals expected, such as Nokia's acquisition of Symbian Ltd.
  • Yahoo! and eBay Inc. may merge, creating an online behemoth with limited overlap and significant cross-marketing potential.
  • Oracle Corp. may acquire BEA Systems Inc., helping CEO Larry Ellison battle SAP and Microsoft Corp. by offering more complete solutions to customers.
  • Veritas Software Corp. may also bid for BEA Systems, with either Oracle or Veritas eventually acquiring the company.
  • Hewlett-Packard Co. will seek to acquire Eastman Kodak Co., with the latter potentially joining the former if it cannot compete.
  • Security and storage M&A will continue to heat up, with companies like Symantec Corp. and NetScreen Technologies Inc. pushing deals.
  • Communication equipment companies like Nortel Networks Corp. and Lucent Technologies Inc. will scan the networking landscape for cheap assets to fill their product voids.

Statistics:

  • 10 high-tech mergers and acquisitions worth over $1 billion expected in 2004.
  • 7 high-tech mergers and acquisitions worth over $1 billion in 2002 and 2003 combined.
  • 10-figure deals will represent 10% of total high-tech M&A deals in 2004.
  • Oracle Corp. has been lagging behind in software industry consolidation, with its hostile bid for PeopleSoft Inc. in limbo.
  • BEA Systems Inc. has a market cap of $5 billion.
  • HP has yet to live up to its promises after merging with Compaq Computer Corp. in 2002.
  • The security and storage M&A market is expected to grow, with companies like Symantec Corp. and NetScreen Technologies Inc. driving the trend.

Sources:

  • TheDeal.com
  • CheckPoint Systems Inc.
  • Marvell Technology Group Ltd.
  • EMC Corp.
  • IBM Corp.
  • Yahoo! Inc.
  • Google Inc.
  • Salesforce.com Inc.
  • Oracle Corp.
  • BEA Systems Inc.
  • Veritas Software Corp.
  • Hewlett-Packard Co.
  • Eastman Kodak Co.
  • Nortel Networks Corp.
  • Lucent Technologies Inc.
  • Symantec Corp.
  • NetScreen Technologies Inc.