Welcome to the February edition of LegalBytes!
2015 was a very busy year for M&A activity with cross-border deal values globally rising in Q4 of 2015 to the highest level ever recorded in a single quarter. Of note, the Technology, Media & Telecommunications (TMT) sector was the most active sector for cross-border M&A in 2015, culminating in the largest technology merger with Dell agreeing to buy out EMC for USD67 billion.
According to Baker & McKenzie's Cross Border M&A Index Q4 2015 (Index), cross-border deals in the TMT sector surpassed all other sectors in 2015 in terms of deal volume (1,007 deals) and came second only to healthcare in terms of deal value (USD212.7 billion). This high level of deal activity is attributable to companies being compelled to reinvent themselves to remain competitive in the global market. As companies strive to adapt to the changing IT environment and cement market positions, they are increasingly resorting to acquisitions to procure new technologies and intellectual property in order to scale up operations, enhance their expertise and capitalise on market opportunities for expansion. In addition, technology companies are beginning to realise the value behind mergers & acquisitions as ways to meet intense capital requirements and as a feasible means of gaining access to talent in the TMT sector.
Technology Stands Out
Among the three TMT sub-sectors (Technology, Media and Telecommunications), Technology stood out accounting for half of the deal value and 70 percent of the deal volume in 2015. In fact, according to the Index, the value of cross-border technology deals reached USD104.4 billion, which represented an increase of 45 percent from 2014.
Thanks to a government policy pushing for increased levels of Chinese outbound investments, China positioned itself as the third-largest acquirer in the Technology sector in 2015 after the US and the UK (with 41 deals valued at USD19.2 billion).
The Convergence Trend
The challenge to remain competitive in the global market has prompted technology companies and companies from traditional sectors like financial services and healthcare to explore cross-industry merger options. According to the Index, "[t]he quest for reinvention has ushered in a new era of convergence between industries creating hybrid sectors such as FinTech and HealthTech." The convergence trend in both FinTech and HealthTech is poised to continue.
According to a recent forecast by Baker & McKenzie published in association with Oxford Economics, the aggregate deal value for deals in the Technology and Telecommunications sectors between 2015 and 2020 is predicted to reach USD2.6 trillion and is expected to peak in 2018 (with deal activity valued at USD492 billion for those two sectors). So, no signs of M&A activity in the TMT sector slowing down any time soon!