3. Microsoft and LinkedIn lead the M&A parade as the
U.S. market stays strong after a record-breaking 2015.
Technology companies are among the largest and
most important economic actors in the U.S., so the
industry generally commands the attention of financial
professionals and the general public.
That attraction is never more powerful than
when two tech giants hook up in a blockbuster
merger. The first half of 2016 saw one of those
major transactions when software behemoth
Microsoft Corp. agreed to acquire LinkedIn Corp.,
the pioneering social media network for business
people, in a transaction valued at $26.2 billion.
Given the ubiquity of both merger partners,
everyone reading this is likely just a click away
from a product supplied by one of them. So the
deal generated some of the biggest headlines
we’ve seen so far this year. The deal seems even
larger and more important given the continued
strength of the M&A market.
Big Names, Big-Ticket Deals
and Big Countries Make Big
Waves in Technology
INTRODUCTION
32016 Mid-Year
TECHNOLOGY
M&A REVIEW
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4. The Year in
Tech M&A So Far
After the feverish pace of transactions last year, many experts expected
a letdown. And with the equity markets getting off to an uncertain start
and political turmoil sapping confidence on both sides of the Atlantic,
the falloff might have been dramatic. However, M&A activity has held up
remarkably well.
“Given some of the headwinds we’ve experienced — market volatility,
Brexit, gridlock in Washington — the M&A market has been resilient,” says
David Henkel, vice president and chief technology officer of Toppan Vite, a
global leader in financial communication. “The U.S. technology industry in
particular is producing some significant transactions. And we already have
yet another transformative deal with Verizon acquiring Yahoo.”
Over 1,900 transactions were announced in the first half of 2016, up from
just over 1,400 for the same period a year ago, according to data from The
Deal. In the technology space, nearly 460 deals were announced in the first
half this year, compared to 285 last year. Of that total, 29 deals were valued
at more than $1 billion, and five topped the $10 billion mark.
While Microsoft-LinkedIn is the largest technology deal currently
in the works, the biggest deal of the year won’t happen. In March,
Honeywell International Inc. walked away from its proposed $91
billion acquisition of United Technologies Corp. The target resisted
the unsolicited bid, suggesting that the combination would likely sink
under regulatory scrutiny.
Honeywell Chairman and CEO Dave Cote continued to extol the virtues of
the deal as he announced the end of discussions and the companies have
held merger talks in the past. In addition, UTC’s stock price fell about 5%
after Honeywell pulled out, leading some observers to speculate that the
target might feel pressure to resurrect the potential deal. But many experts
and shareholders share UTC’s regulatory fears, so the deal is unlikely to
show up in the year-end totals.
The Big Numbers
First Half
1,900
Announced M&A
transactions 1st half of
2016
460 (24%)
Technology M&A
transactions
29(6%)
Valued at more than
$1 billion
5(1%)
Topped the
$10 billion mark
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5. The Year in Tech M&A Continued
Despite that high-profile collapse, the technology industry continues
to draw attention, investment and takeover bids. And Microsoft and
LinkedIn weren’t the only household names to make M&A news. For
example, car hire service Uber Technologies Inc. in June received a
$3.5 billion infusion from Saudi Arabia’s Public Investment Fund. The
investment, and other recent fundraising efforts, reportedly valued
Uber at more than $60 billion.
Software was a particularly active sector for M&A in the first half,
with the biggest deal being Thoma Bravo LLC’s $3 billion deal for QLik
Technologies Inc. The biggest name, though, was customer relationship
management specialist Salesforce.com Inc., which paid $2.8 billion for
Demandware Inc., just missing the top 10. Other significant software
deals included Vista Equity Partners LLC’s $1.8 billion buyout of Marketo
Inc. and the $509 million acquisition of SciQuest Inc. by Accel-KKR LLC.
Elsewhere, Rovi Corp, which provides guides that allow TV viewers
to search and select programs, paid $1.1 billion in May for TiVo Inc.,
which makes devices that record and stream those TV shows. On the
hardware front, printer maker Lexmark International Inc. agreed in
April to be acquired by a Chinese group led by Apex Technology Co. Ltd.
and PAG Asia Capital.
The Lexmark acquisition highlights another characteristic of this M&A
market: The enthusiastic participation of ambitious buyers from China.
In February, Tianjin Tianhai Investment Co. Ltd. paid $6 billion for Irvine,
Calif.-based Ingram Micro Inc., a distributor of IT products. In April,
a group of investors led by Libin Sun offered to acquire chipmaker
Integrated Device Technology Inc., of San Jose, Calif., for $4 billion.
One word of caution: While the investors reportedly held a stake
in the target, whether the bid is a genuine expression of interest
remains unclear.
Whether the IDT deal materializes, Chinese buyers will likely rank
among the most active as consolidation continues in several
technology sectors, including software and semiconductors.
Software
Rising Tech Sector
$3.5B Investment
Target Investor
Uber Technologies
Inc.
Saudi Arabia’s
Public Investment
Fund.
$3B Acquisition
Target Buyer
QLik Technologies
Inc.
Thoma Bravo LLC
$2.8B Acquisition
Target Buyer
Demandware Inc. Salesforce.com Inc.
$1.8B Acquisition
Target Buyer
Marketo Inc. Vista Equity
Partners
$1.1B Acquisition
Target Buyer
Tivo Inc. Rovi Corp.
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6. The Year in Tech M&A Continued
“We shouldn’t underestimate the influence China will continue
to exert on the global economy,” notes Henkel of Toppan Vite.
“Companies there are pursuing growth as aggressively as their rivals
around the world.”
The list of potential targets also includes several household names,
chief among them Twitter Inc. The social media and micro-blogging
service has had difficulty convincing Wall Street that it can continue
to add users and increase revenue, raising the question of whether it
should find a larger, more well-heeled partner.
That chatter became louder after the LinkedIn deal, as the
transaction is seen as a model for Twitter. The talk grew louder still
after Salesforce.com CEO Marc Benioff let it be known that he had
considered an acquisition of Twitter before launching his bid for
Demandware, a deal that closed in July.
Other big names potentially on the block include chipmaker Xilinx Inc.
— which could draw interest from larger rivals such as Qualcomm Inc.
or Broadcom Ltd. — and International Game Technology, a Las Vegas-
based casino game maker that is apparently hoping for a better deal
than what might result from its discussions with Italy’s Gtech SpA.
While it’s not clear which, if any, of those companies will end up as
takeover targets, the M&A market should remain strong for the rest
of the year. The next big headlines could come anytime and could
certainly include several well-known companies. Stay tuned.
“Barring some unforeseen event, the M&A market should solidify as
some of the geopolitical clouds begin to clear in the second half,” says
Toppan Vite’s David Henkel. “Risk and uncertainty won’t magically
vanish, but executives should be better able to assess the landscape as
new realities settle in.”
China
Geographic Hotspot
$3.6B Acquisition
Target Buyer
Lexmark Interna-
tional Inc.
Apex Technology
Co. Ltd.
$6B Acquisition
Target Buyer
Ingram Micro Inc. Tianjin Tianhai
Investment Co. Ltd.
$4B Offer
Target Potential Buyer
Integrated Device
Technology Inc.
Libin Sun
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7. Source: BoardEx
Top Ten U.S. Technology M&A Deals
DATA HIGHLIGHTS
Announced and not withdrawn during the First Half of 2016
01 LinkedIn Corp.
Target
$26.2 billion
Deal Value
Microsoft Corp.
Buyer
Internet
Sector
June 13
Date
Sale touched off chatter about a possible deal
for Twitter
02 ADT Corp.
Target
$12.32 billion
Deal Value
Apollo Global Management
LLC.
Buyer
Internet
Sector
Feb 16
Date
Deal continues a long-running consolidation
process in home security; target will be com-
bined with the buyer’s Protection 1 business
03 Hewlett Packard Enterprise Inc.
(Servers, Storage business) Target
$8.5 billion
Deal Value
Computer Sciences Corp.
Buyer
Hardware
Sector
May 24
Date
Sale continues the transformation of a Silicon
Valley icon
04 Ingram Micro Inc.
Target
$6 billion
Deal Value
Tianjin Tianhai Investment
Co. Ltd.
Buyer
IT Products
Sector
Feb 17
Date
Because the target is a distributor, the deal
may not draw regulatory scrutiny
05 Leidos Holdings Inc.
Target
$5 billion
Deal Value
Lockheed Martin Corp.
Buyer
IT Services
Sector
Jan 26
Date
Lockheed will combine its government IT ser-
vices business with Leidos in a Reverse Morris
Trust transaction
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8. Source: BoardEx
Top Ten U.S. Technology M&A Deals
DATA HIGHLIGHTS
Announced and not withdrawn during the First Half of 2016
06 Blue Coat Systems Inc.
Target
$4.65 billion
Deal Value
Symantec Corp.
Buyer
Cybersecurity
Sector
June 13
Date
Target had been planning an IPO; deal
represents buyer’s largest purchase since its
2005 acquisition of Veritas Software
07 Integrated Device Technology Inc.
Target
$4.3 billion
Deal Value
Investor Group
Led By Libin Sun
Buyer
Semiconduc-
tors
Sector
Feb 16
Date
Target released a statement casting doubt on
the bid’s seriousness
08 Lexmark International Inc.
Target
$3.6 billion
Deal Value
Apex Technology Co. Ltd., PAG
Asia Capital, Legend Capital
Buyer
Hardware/
Software
Sector
Apr 19
Date
Deal is subject to a U.S. national security
review
09 Perot Systems Corp.
Target
$3.1 billion
Deal Value
NTT Data Corp.
Buyer
IT Services
Sector
Mar 28
Date
Target was part of EMC Corp., which was
acquired by Dell Inc. in October 2015
10 Qlik Technologies Inc.
Target
$3 billion
Deal Value
Thoma Bravo LLC
Buyer
Software
Sector
June 2
Date
Price represents a 40% premium to Qlik’s stock
price before activist fund; Elliott Management
disclosed a position in the company
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9. Source: BoardEx
Top Five Potential M&A Targets
DATA HIGHLIGHTS
01 Level 3 Communications Inc.
Potential Target
$20.5 billion
Market Cap
Telecom
Sector
Fiber optic network operator is attractive to bandwidth-hungry service provders
like Google or Comcast
02 Workday Inc.
Potential Target
$15.7 billion
Market Cap
Software
Sector
Enterprise cloud software provider could be in play following the LinkedIn deal;
SAP is a possible suitor
04 Pandora Media Inc.
Potential Target
$2.9 billion
Market Cap
Internet
Sector
Keith Meister’s Corvex Mangement holds 10% of the online radio company and
sees “significant interest” from suitors, most recently from Liberty Media
03 Twitter Inc.
Potential Target
$12.8 billion
Market Cap
Internet
Sector
Another potential benficiary of Microsoft’s spending; some investors believe that
unsuccessful LinkedIn suitors might look here
05 Aveva Group plc
Potential Target
$1.2 billion
Market Cap
Software
Sector
An agreed 2015 merger with Schneider Electric fell through; GE or Emerson
Electric may be attracted
Technology Sector
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10. Source: BoardEx
Key Decision-Makers at the Top Five Targets
DATA HIGHLIGHTS
Technology Sector
01
Level 3 Communications Inc.
Jeff Storey
CEO
Independent Directors
Kevin (Chili) Patrick Chilton Retired Air Force Generalt
Steven (Terry) Terrell Clontz Former CEO, Starhub Ltd.
James O. Ellis Jr. (Independent Chairman) Retired U.S. Navy Admiral
Irene M. Esteves Former CFO, Time Warner Cable
Kevin W. Mooney EVP, Blackbaud Inc.
Lim (Peter) Huat Seah Former CEO, Singaore Technologies
Peter H. Van Oppen Managing Partner, Trilogy Equity Partners
Michael (Mike) Mahoney Former CEO Commonwealth Telephone Enterprises
Spencer Hays Former SVP/GC Time Warner Inc.
01
Level 3 Communications Inc.
Jeff Storey
CEO
Independent Directors
Kevin (Chili) Patrick Chilton Retired Air Force General
Steven (Terry) Terrell Clontz Former CEO, Starhub Ltd.
James O. Ellis Jr. (Independent Chairman) Retired U.S. Navy Admiral
Irene M. Esteves Former CFO, Time Warner Cable
Kevin W. Mooney EVP, Blackbaud Inc.
Lim (Peter) Huat Seah Former CEO, Singapore Technologies
Peter H. Van Oppen Managing Partner, Trilogy Equity Partners
Michael (Mike) Mahoney Former CEO, Commonwealth Telephone Enterprises
Spencer Hays Former SVP/GC, Time Warner Inc.
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11. Source: BoardEx
Key Decision-Makers at the Top Five Targets
DATA HIGHLIGHTS
Technology Sector
02
Workday Inc.
Aneel Bhusri
CEO
Independent Directors
George J. Still Jr. (Lead) Partner Emeritus, Norwest Venture Partners
Albert (Skip) George Battle Former CEO, Ask Jeeves
Christa Davies CFO, Aon plc
Michael (Mike) McNamara Former COO, Flextronics International
Jerry Yang Co-Founder, Yahoo!
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12. Source: BoardEx
Key Decision-Makers at the Top Five Targets
DATA HIGHLIGHTS
Technology Sector
03
Twitter Inc.
Jack Dorsey
CEO
Independent Directors
Dame Marjorie Scardino (Lead) Former CEO, The Economist
Peter H. Fenton General Partner, Benchmark Capital
Hugh Johnston CFO, Pepsico Inc.
Baroness (Martha) Lane-Fox of Soho Co-Founder, LastMinute.com
Debra L. Lee CEO, BET Networks
David S. Rosenblatt CEO, 1stdibs.com Inc.
Evan Williams CEO, Obvious Corp.
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13. Source: BoardEx
Key Decision-Makers at the Top Five Targets
DATA HIGHLIGHTS
Technology Sector
04
Pandora Media Inc.
Tim Westergren
CEO
Independent Directors
James M.P. Feuille (Independent Chairman) General Partner, Crosslink Capital
Peter Chernin CEO, Chernin Group
Peter Gotcher (Lead) Former Partner, Redpoint Ventures
Roger Faxon Former CEO, EMI Group
Anthony Vinciquerra Former CEO, Fox Networks
Elizabeth (Betsey) Nelson Former CFO, Macromedia
Mickie Rosen Former SVP, Yahoo!
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14. Source: BoardEx
Key Decision-Makers at the Top Five Targets
DATA HIGHLIGHTS
Technology Sector
05
Aveva Group plc
Richard Longdon
CEO
Independent Directors
Philip (Phil) Aiken (Chairman) Former Group President, BHP Billiton
Jennifer Allerton Former CIO Unilever NV
Jonathan Brooks Former CFO, ARM Holdings plc
Philip Dayer Former Head of Corporate Finance, Barclays Capital Research
Christopher (Chris) Humphrey Former Group CEO, Anite plc
142016 Mid-Year
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M&A REVIEW
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15. Where are they now?
Executive and Director Moves at Select Merger Partners
Jahangir Mohammad, General Manager
(CEO)
Scott Barkley, Division Head
(Vice President - Product)
Macario Namie, Division Head
(Vice President - Strategy)
Cindy Patterson, Division Head
(Chief Customer Officer)
Julian Karl Ong, Executive
(Chief Legal Officer)
Daniel Rabinovitsj, Division COO
(COO)
Georges Antoun
Barton Burstein
Gaurav Garg
Stewart Grierson
Mohanbir Singh Gyani
Richard Lynch
Steven (Terry) Clontz
Jasper Technologies
(Cisco Systems)
Ruckus Wireless
(Brocade Communciations)
Executives joining combined entity
(Old Title)
Executives joining combined entity
(Old Title)
Target
(Buyer)
Target
(Buyer)
Departing directorsDeparting directors
Departing directors
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TECHNOLOGY
M&A REVIEW
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16. Where are they now?
Executive and Director Moves at Select Merger Partners
Daniel Bresingham, Chief of Staff
(EVP/CFO)
P. Gray Finney, SVP/Chief Legal Officer
(SVP/General Counsel)
Timothy Whall, President/CEO
(CEO)
Donald Young, SVP/COO/CIO
(SVP/COO/CIO)
Jamie Haenggi, SVP/Chief Marketing
Officer
(SVP/Chief Marketing Officer)
Naren Gursahaney (President/CEO)
Daniel Bresingham
P. Gray Finney
Timothy Whall
ADT
(Temasek/Protection One)
Executives joining combined entity
(Old Title)
Directors joining combined entityTarget
(Buyer)
Departing executives Departing directors
Thomas Colligan
Richard Daley
Timothy Donahue
Robert Dutkowsky
Bruce Gordon
Naren Gursahaney
Bridgette Heller
Kathleen Hyle
Christopher Hylen
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