Nestled in the heart of Silicon Valley’s Technology Hub, Ocean Tomo’s Roy D’Souza, Elvir Causevic and Molly Keelan participated in Wednesday’s Western M&A Forum in Santa Clara, CA.
A rare gathering of M&A, corporate, private equity and financial experts assembled to opine on the current and future state of M&A.
Roy D’Souza, Managing Director IP Valuation, participated in a panel discussion titled: M&A Trends and Outlook for 2012. The panel members agreed that the Global M&A Tech Volume has slightly rebounded in 2011, and since 2007 has been cyclical.
Transaction volume has significantly declined since the peak in 2007, while the average deal size has increased about 70% since 2004.
A surprising data point was shared, indicating that while many think over 50% of deals close once an LOI is signed, the success rate is much closer to 20-30%.
Looking at 2011 deals, one may ask, who are the current M&A buyers?
Large and mid-cap companies, while cash rich, have spent resources searching for strong acquisition targets. Small cap companies have also been relatively active. Within the technology space the panel members have observed a bifurcation in larger companies deals with significant uptick in strategic buy-outs as opposed to IPO's, with certain divestitures and spin-offs occurring as companies realign their portfolios.
Domestic & overseas publicly-traded companies are searching for strong acquisition targets due to their large cash stockpiles. U.S. companies also continue to look overseas for larger acquisitions. While the foreign based acquisitions tend to be cheaper, there continues to be difficulty finding these overseas targets due to the quality of companies available and sometimes, cultural differences.
Recent transactions highlight intellectual property (IP) as the driving force behind the deals. The IP-centric deals are getting to the stage where significant companies have enough motivation to protect and further monetize their IP through both patent litigation and M&A.
Roy commented on the importance of bolstering a company’s IP portfolio for both offensive and defensive reasons, including IP litigation and completing strategic acquisitions to make companies more vertically integrated.
The Nortel IP sale (one of the most widely recognized IP transactions this year) where the portfolio sold for an average of $750K per patent, made many wonder if this is a new trend. Roy confirmed that this deal, as well as many others, is company specific - not a benchmark.
Questions center around Google’s acquisition of Motorola Mobility, HP's recent deals, and Kodak's attempt to sell 1,100 patents to help generate enough cash to avoid a Chapter 11 filing.
Panelists suggested that we will see future IP acquisitions in other technology areas, with the semiconductor industry being a prime example.