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Trends to Watch in Technology M&A for 2009
A recent report of the international law firm Skadden indicates some interesting trends in technology Mergers & Acquisitions (M& A) for 2009. They predict that the technology M &A market in 2009 will be a more active than in the latter half of 2008. Reason being that the prices of many technology companies are at historic lows, other traditional exits are closed and a number of cash-rich potential acquirers in are in view. Other trends are:
- The Continued Presence of Unsolicited Offers i.e. hostile M&A activity.
- Strategic investors have used and will continue to utilize unsolicited proposals (e.g., Microsoft/Yahoo, Samsung/SanDisk, Microchip/Atmel).
- Hedge funds seeking to exit their positions, but are unable to do so absent a change of control – particularly in small-cap technology companies with low trading volumes, will put these small-cap technology companies in play.
- Many technology companies trading close to, or even below, the value of their cash, making them attractive targets to potential acquirers.
- The Continued Globalization of the Technology Industry and the Technology M&A Market.
- Continued cross-border M&A activity, including increased investment in the US from foreign acquirers.
- US technology companies will continue to make fill-in acquisitions outside the US to better position themselves in an increasingly global technology industry.
- Foreign investment from offshore strategic investors and possibly sovereign wealth funds may increase.
- Foreign acquirers, like their domestic counterparts, are willing to make unsolicited offers (e.g., Samsung/SanDisk), and we expect to see more of this in the coming year as hostile M&A activity ingeneral increases.
- The globalization of the technology sector has been accompanied by a globalization of antitrust regulatory regimes.
- Apart from the existing US and European antitrust regimes, China and India have or will have soon anti-monopoly regulations.
- National security reviews and privacy and export control protections, are increasingly significant, alos in cross border context.
- Acquirers may need to provide new costly incentives to incentivize key target employees to remain, as the depressed financial markets have severely impacted the value of employee options and other equity compensation.
- As a result of the boom in convertible debt issuances at technology companies in recent years, there is the potential for increased distressed M&A or debt-to-equity conversions as this convertible debt comes closer to maturity.
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