M&A Activity in IT Industry Surges in 1995

Strategic Insights -

Robust financial markets, emerging technologies, and an accelerating pace of technological change are driving a dramatic increase in merger and acquisition (M&A) activity in the information technology (IT) industry. According to a report by Broadview Associates, the leading M&A advisor to the global IT industry, the number of M&A transactions in the IT industry totaled 649 in the first half of 1995, a gain of 76 percent compared to the same period in 1994. The total transaction value in the first half of 1995 also achieved a new record, totaling $39.3 billion, a 53 percent climb over the mid-year 1994 total of $25.7 billion.

Key Takeaways:

  • The number of M&A transactions in the IT industry surged 76 percent in the first half of 1995, reaching 649 deals.
  • The total transaction value in the first half of 1995 reached $39.3 billion, a 53 percent increase over the mid-year 1994 total of $25.7 billion.
  • Transactions involving stock as the sole medium of exchange accounted for 43 percent of all deals, up from 41 percent in the same period in 1994.
  • The desktop market, driven by the pending arrival of Windows '95, is a major catalyst for M&A activity, with companies seeking to exploit new market opportunities or achieve the critical mass necessary to compete.
  • The networking arena is also experiencing record M&A activity, with larger vendors acquiring niche players to ensure they can deliver a full spectrum of networking solutions.
  • The rush to the Internet and other online services has intensified M&A activity, with companies providing online access and tools moving to establish market share in these relatively new commercial markets.
  • The accelerating rate of technological change is driving M&A activity, with companies weighing the risk of missing a technological window of opportunity against the cost of developing it in-house.
  • Large transactions are occurring more frequently, with transactions valued at more than $100 million comprising 10 percent of transactions in the first six months of 1995.
  • Transactions valued at less than $10 million continue to dominate merger and acquisition volume, comprising 59 percent of deals in the first half of 1995.

Statistics:

  • The number of M&A transactions in the IT industry increased 76 percent in the first half of 1995, reaching 649 deals.
  • The total transaction value in the first half of 1995 reached $39.3 billion, a 53 percent increase over the mid-year 1994 total of $25.7 billion.
  • Transactions involving stock as the sole medium of exchange accounted for 43 percent of all deals in the first half of 1995.
  • The software products and services sector saw a 323 percent increase in transaction value, reaching $16.9 billion in the first half of 1995.
  • The number of transactions among supporting products and services companies more than doubled, increasing from 60 in the first half of 1994 to 126 in the first half of 1995.
  • Transactions in the content services sector witnessed a 156 percent increase, from 34 transactions in the first half of 1994 to 87 transactions in the first half of 1995.

Sources:

  • Broadview Associates, "Merger and Acquisition Report, First Half 1995"
  • Broadview Associates, "Merger and Acquisition Database"
  • Broadview Associates, "Merger and Acquisition Report, Europe and the United Kingdom"