Big deals are no big deal for July

by Brenon Daly

Even a surge in big-ticket transactions in several mature segments of the tech market couldn’t boost overall July M&A totals. Spending on tech deals around the globe this month slumped to just $33bn, down about 20% from the monthly average in the first half of the year, according to¬†451 Research’s M&A KnowledgeBase.

This month’s decline comes despite acquirers announcing 10 separate tech transactions valued at over $1bn. That’s a notable acceleration from the first six months of 2019, when a total of just 40 billion-dollar deals were announced. Our data shows that July marks the first month to hit a double-digit number of $1bn+ acquisitions since last October.

What the big-ticket transactions gained in volume in July, they lost in overall value. On average, the M&A KnowledgeBase indicates that buyers paid just 2.5x trailing sales in the $1bn+ deals they announced in July, down from roughly 4x trailing sales in significant transactions announced since the start of 2018. The richest valuation paid in this month’s billion-dollar purchases (Cisco handing over $2.8bn, or 6.8x trailing sales, for Acacia Communications) stands as only the tenth-highest multiple of any billion-dollar deal announced so far this year.

More broadly, the relatively slow start in July puts the current Q3 on pace for the fifth consecutive quarter of flat to lower M&A spending, according to the M&A KnowledgeBase. Still, we don’t want to overstate the decline. Based on the spending through the first seven months of the year, we are on track to record some $490bn worth of tech M&A, which would rank 2019 as the third-highest annual spending level since 2002.

Posted in M&A