Report: Fewer mergers, acquisitions in Q1 2015, but still strong

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Last week, Mergermarket released its Q1 2015 Global M&A roundup report for the Technology, Media and Telecom (TMT) Sector, and reported that this year’s first quarter wasn’t as impressive as last year’s Q1, but it was still strong.

During the beginning of 2015, there were 612 deals worth $144.3 billion. The number of deals was down from 673 in 2014’s first quarter, while the total value tumbled from $181.5 billion, or 20.5 percent. Nevertheless, the report’s authors say it’s still a commendable start to the year with the second biggest value for a first quarter since 2006 and the second highest deal count on the company’s record.

What drew the impressive valuations during the January-to-March period? It was led by five so-called mega-deals worth billions, and accounted for close to half (49.4 percent) of the industry’s total activity. Moreover, the industry was inundated by mergers between telecommunications companies – four of the five firms in Q1 were listed in the telecom sector.

Experts were concerned over the fact that TMT’s international M&A activity share had decreased from 28.6 percent share in the first quarter of 2014 to 19.2 percent share in the first quarter of 2015. However, the integrated sector has persisted in its strength on a global level as it was followed by the consumer industry’s $143.2 billion.

The three biggest markets for TMT M&As (in terms of valuations) consisted of:

  • United States: 325 deals; $56.3 billion total value (down from $115.8 billion)
  • Europe: 464 deals; $61 billion total value (up from $45.6 billion)
  • Asia-Pacific: 54 deals; $22.6 billion (led by China’s $16.5 billion)

The five biggest deals in the TMT M&A markets were:

  • BT Group (pictured above)-EE Limited Country ($19.048 billion)
  • Freescale Semiconductor-NXP Semiconductors ($15.972 billion)
  • Telefonica UK Limited-Hutchison Whampoa Limited ($15.299 billion)
  • Frontier Communications-Verizon Communications ($10.54 billion)
  • Charter Communications-Bright House Networks ($10.4 billion)

The most prominent financial advisor in terms of both deal count and value was Goldman Sachs ($46.4 billion and 17 deals). Meanwhile, Freshfields Bruckhaus Deringer was the No. 1 legal advisor by value in Q1 ($38.7 billion) and Fenwick & West was first in legal advising by deal count (25).

Overall, the future appears bright for the TMT market. Mergermarket states that in terms of potential companies for sale, TMT activity is showing very strong interest in most regions worldwide, due to certain aspects of the sector that are generating more interest from investors. This could later diminish the effects of other areas that are being burdened by fierce regulatory environments.

One Mergermarket expert predicts that with the heightened attention of cyber security and data privacy there could be a growing number of such mergers moving forward. With that being said, North America will continue to be the hottest region in TMT activity, though there are warnings that certain niches could suffer in the coming months. In addition, North Asia will also be an area to pay attention to, especially considering that it completed 206 TMT M&A deals in Q1.

“What we used to think of as the tech sector has expanded to almost every company,” said Tal Hacohen, partner at Orrick, Herrington & Sutcliffe, in a statement “We’re all kind of tech-based now.”

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