This article is written by Kashish Goel who is pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho.
Table of Contents
Introduction
Coronavirus outbreak has played a dominant role in the downfall of the global economy at large. This created an effect that would last in the tech industry around the world for a long time. Due to the world under lockdown for the better part of 2020, this created a demand for the remote working, an action taken by the government so that the economy does not come to a stand-still. One of the problem that was faced by the business big or small was the sudden shift to work from home. Some of the sectors are there that prospered during this time such as Ed-Tech, Gaming, Healthcare tech.
Merger and Acquisition Overview
In simple terms, the activity of Merger or Acquisition refers to companies getting together with an intent in the first case and without the intent in the second case. Merger can be said in a defined form, when 2 or more companies come together to form a new one while on the other hand Acquisition is a move of taking over the company as a whole. These are done in order to create a more valuable entity that would be more successful as compared to an individual stand.
The main objective behind these activities is maximization of wealth as the companies are always on the lookout for different opportunities to do it.
For more detailed analysis on Mergers and Acquisition visit the following page.
Technological sector
These is a category of companies that are relating to the distribution, or research and development of technologically based goods and services. This sector includes the businesses like creation of software, manufacturing electronics, services relating to the information technology and computer or products.
The other companies of other sector are dependent on inventions and products that are coming out of this sector to create a software for their enterprises, to manage their logistics, protecting their databases and the important information of services that help the companies keeping their strategic edge. The term for this sector is frequently shortened to “Tech Sector” and used interchangeably with the term technology industry.
A huge credit is given to this industry as due to this sector, companies are launching a whole new business lines that were never existing before.
Mergers and acquisitions in tech sector (2020)
As of by the end of the 3rd Quarter of 2019, the deals in the M&A sector worth $245 billion had been reported globally, this marks a decrease of 25% YOY according to Global Data.
Trends in Technology Merger and Acquisition and highlights
Source: PwC U.S.A.
Highlights of the Deals in H1(first half) of 2020
- Largest deal done was of $13.0 Billion
- 4 mega deals in 2020
|
H1 2020 |
H1 2020 vs H1 2019 |
H1 2020 vs H2 2019 |
|
Total deal value $72.9 billion |
↓ 58% |
↓ 15% |
|
Total deal volume 775 |
↓ 6% |
↓ 6% |
|
Average deal size (that were closed) $94.0 million |
↓ 56% |
↓ 10% |
Some of the top Mergers and Acquisition that took place in the year 2020
Source: PwC U.S.A.
- Koch Industries and Infor – $13 billion
Koch industries took full control of Infor ERP (enterprise resource planning) vendor Infor was 70% owned by Koch industries which is a privately held conglomerate with interests in manufacturing, chemicals, minerals and commodities. In the second month of 2020 they agreed to buy out the remaining stake in the target company from the founding investors at Golden Gate capital. Koch Industries plans to make this acquisition a standalone subsidiary that will operate under its current management. Due to the previous partnership, the companies have received a boost in the development of cloud suites. It is known that Infor was ramping up for what was expected to be a significant initial public offering, but now all the rumours regarding an IPO were quashed.
- Just Eat Takeaway.Com and Grubhub Inc. – $7.3 billion
The merger got the approvals of the regulatory authorities as the European company officially announced that they are in a deal with Grubhub (US) for a sum of $7.8 billion in an all share deal. This is one of the biggest acquisition in the food delivery space and also important as major players in the US like that of Uber Eats have also been in the competition. With combined operation as said by the Just Takeaway, they will process 593 million orders and a customer base of 70 million.
- Intuit Inc. and Credit Karma Inc. – $7.1 billion
Intuit is a US software maker, it is best known for the its products like Mint, TurboTax, QuickBooks. It was announced that the they will acquire the fellow company of the Silicon Valley also their rival Credit Karma for a sum of $7.1 billion.
This acquisition will enable Intuit to build a complete financial assistant that would assist the customers, combining income, credit histories and spending an all in one financial product.
As per the CEO of the Intuit, Sasan Goodarzi- by joining forces, it would put more money in the pocket of the customers and provide them with insight and advice enabling them to have a higher education, vacation, also to buy a home that they wanted.
- Visa Inc. and Plaid Inc. – $ 5.3 billion
Visa announced that they would be acquiring the fintech start up Plaid for a sum of $5.3 billion paid in cash. This is a San Francisco based start-up that was built in order to link the bank account of the customers to the online payment or fintech apps like that of TransferWise or Vemno through secure application programming interfaces.
The valuation of $5.3 billion is a steep rise in the valuation as it is a significant premium over the last valuation that was near the figure of $2.65 billion that was followed by a series C funding of $250 million in December 2018. In this funding rivals such as Visa and MasterCard were also investors.
- Morgan Stanley and ET Trade – $13 billion
ET trade an online brokerage announced that they are being acquired by the American investment bank for sum of 13 billion on 21st February, 2020. This acquisition was done by Morgan Stanley in a hope that it can help in boosting the wealth management by attracting a younger customer due to the lower margins that are associated with managing the wealth in a digital way. This system includes commission free treading and roboT advice that were popularised by Robinhood and Nutmeg in US and UK respectively.
- Symphony Tech Group and RSA Security Inc. – $2.1 billion
Dell Technologies on Tuesday confirmed it’s selling its RSA cybersecurity business to a consortium led by Symphony Technology Group (STG), Ontario Teachers’ Pension Plan Board and AlpInvest Partners, for more than $2 billion in cash. Speculation for the deal were intensified in the month of January as Dell was looking to offload RSA, which was acquired from EMC IN 2016. This transaction included purchase of RSA Archer, RSA SecurityID, RSA Fraud and Risk Intelligence, RSA NetWitness Platform and was expected to close this year.
- BMC Software and Compuware – $2.0 billion
A deal was agreed between BMC Software and Compuware in March for a sum of $2 billion dollars that BMC will acquire Compuware making this its third purchase in just over a year in the field of mainframe specialist.
The deal signals further consolidation of the mainframe support and services vendor landscape, as BMC has bought up RSM Partners and CorreLog in the past year or so, following an injection of cash when it was acquired itself by private equity firm KKR in 2018.
“The combined company will help customers better manage their mainframe operations, cybersecurity, application development, data, and storage as part of their enterprise devops strategies,” BMC said in a statement.
- Zynga and Peak Games- $1.8 billion
Turkey had its first billion-dollar start-up that was acquired by the Zynga games. This is the company behind popular games like Candy Crush, style mobile gaming apps like Toon Blast and Toy Blast for a sum of $1.8 billion that was structured in $900 million in cash and $900 million in shares of Zynga. Zynga already had made an acquisition of $100 million in the year 2017. By doing this acquisition Zynga got control of the two popular titles among many and they did not have to develop them from scratch like that of Toon Blast and Toy Blast that have over 12 million active users. This help them expand their business of advertisement as well.
- Forescout and Advent- $1.9 billion
Forescout was acquired by global private equity investor Advent International in a deal worth 1.9 billion. The all-cash transaction was announced on 7th Feb, 2020. A significant premium of 30% was paid over the LTP of 19-10-2019 that was $25.45, that came out to be $33. Forescout offers clients security solutions focused on network visibility and device of the user. The deal was subjected to regulatory approvals.
- Microsoft and Affirmed Network
It was announced by the software giant in March that they would be acquiring Boston based Affirmed Network in March, 2020. Affirmed Network is a company that has its specialisation in virtualization and cloud based mobile network technology and this certainly makes it an attractive company for acquisition as an investment for the next-gen 5G connectivity. The terms of the deals were not announced by the parties but, affirmed was valued upwards of $1.3 billion that was after a $38 million funding round.
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