Is the M&A Market (Slowly) Making a Comeback?

by Brenon Daly

The M&A market is back. OK, not really. But looking at this week’s deal flow, one could forget that spending on acquisitions plummeted 85% in the first three months of the year. (We recently noted that Q1 2009 was the first time since we began tracking tech M&A in January 2002 that we saw a quarter without a deal worth more than $1bn.) Literally as soon as the calendar flipped to April, we saw one 10-digit transaction, and that’s been followed by three others.

Of course, most people point to Oracle’s (ORCL) pending purchase of Sun Microsystems (JAVA) as evidence that ‘animal spirits’ (as Keynes would say) are starting to stir again. That purchase stands as the largest IT transaction since Hewlett-Packard’s (HPQ) $13.9bn acquisition of EDS last May. (Yesterday we reported how Oracle’s planned pickup has reshuffled our league table, at least in the early going of 2009.) Another way to view the mammoth size of the deal is to consider that the $260m break-up fee in Oracle-Sun is larger than all but 15 of the announced deal values so far this year. (As an aside, we would note that the $260m represents 3.5% of the deal value, which is a point above where many other transactions come in.)

However, there were other signs of life in the sector this week beyond that big acquisition. Well-known buyer Symantec (SYMC) returned to the market for the first time in a half-year, paying what we understand was $18m for Mi5 Networks. Also, private equity players notched a pair of deals. And we even saw an unsolicited bid for a public company. We would note that it wasn’t a run at some micro-cap company that no one has ever heard of, much less owns shares in. Emulex (ELX) is a 30-year-old vendor that earns money and typically trades about three million shares each day. Broadcom (BRCM) offered $9.25 for each share of Emulex, for a total equity value of $764m. However, Emulex stock has been trading above $10 since the offer.

Comments

[baltbear:]

orcl+sunw = synergy, as opposed to sunw + ibm = rollup.
the last big wave of rollups, imho, fed the net bubble collapse.
synergy is useful if you know where you are going.
broadcom going more vertical w/ elx? likewise, a belief that something is going to go somewhere.

Apr 25 08:06 PM

[Buy and Hol...:]

If I were the CEO of a company with a lot of cash, I'd be on the prowl for acquisitions. Now is the time to acquire a company which has good technology or good products but which is facing a cash flow problem.

People tell investors that now is a great time to buy good companies at a discount. Well, that goes for CEOs as well!

Apr 25 09:35 PM