What is driving the current M&A market

What is driving the current Software and IT service M&A market? An answer in one word: Cash.

The Corum Index (as reported on the monthly Corum Webinars) shows that 57% of announced deals are all cash.

Private Equity has over $500 billion to invest. If they do not invest they have to give it back! Developing economies such as China have increasing amounts of exchange reserves and sovereign wealth funds so are becoming more active in acquiring technology that allows them to move in to higher value products. Technology Corporates have historically high levels of cash Microsoft $51bn, Cisco $44bn, Google $39bn, Apple $28bn, Oracle $28bn. Interestingly for us in Europe, much of the cash of US Corporates is held outside the US and would be heavily taxed if it is returned into the US.

And what do you do with all of this cash? It can cost money to leave it in a bank. Deposit rates have never been so low. Invest it in new technology.

Posted by , on 1 November 2011
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