How cloud is ‘background radiation’ in a record tech M&A 2016
The cloud tech IPO landscape may have struggled a little of late, but the analysts at EY – formerly Ernst & Young – argue that on a global scale, 2016 saw an all-time record high in overall technology activity due to the “massive digital transformation” caused by disruptive technologies.
The overall aggregate 2016 value of $466.6 billion (£373bn) was up 2% over 2015’s previous record, while the Q416 figure of $117.2bn was down 38% year over year.
For the full year of 2016, the consultancy put together a graph of number of deals in the sector compared with average value of deal. As expected from a more mature market, cloud and software as a service (SaaS) was miles ahead in terms of volume – between 1,200 and 1,400 – but paled in monetary terms compared to connected car and Internet of Things (IoT) technologies.
The report coins the term ‘background radiation’ when describing cloud deals, adding that the IoT and artificial intelligence (AI) will continue to fuel high tech-targeted M&A in 2017.
In terms of specific regions, cloud and SaaS was a factor in more than a quarter (28%) of EMEA deals in Q416, compared with the Americas where it factored into almost 950 deals.
The standout, as the report affirms, was the Oracle-NetSuite acquisition for $9.3bn, announced in July but only completed in November. Microsoft’s $26.2bn outlay for LinkedIn was described by EY as a reflection of “the way social networking is transforming business, the rising role of big data and the potential for both those technologies to transform Microsoft products.” Equinix’s $3.6bn move to snaffle 29 data centres from Verizon in December was also noted.
Earlier this month, the yearly analysis issued by Byron Deeter, partner at Bessemer Venture Partners (BVP), came to a pretty similar conclusion. While IPOs ran comparatively dry in the cloud space, with Twilio the star performer, companies acquired in the public cloud space represented 40% of the $300bn market cap. The top 100 private cloud companies, as noted by Forbes in September, also represented more than $100bn of private enterprise value alone.
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