ChannelLife Australia - 2016 ‘hotbed’ of M&A activity predicted – so who’s buying who?

MA01.jpg

2016 ‘hotbed’ of M&A activity predicted – so who’s buying who?

VMware, Akana, Apiary and a slew of other companies are likely to be the subject of mergers and acquisition activity in 2016, with research and advisory company 451 Research predicting a hotbed of activity in the year ahead.

451 Research says acquirers – including the likes of Google, IBM, Rackspace, Huawei and SolarWinds – will spend ‘hundreds of billions of dollars’ on tech acquisitions in the coming year as they adapt to a rapidly changing marketplace.

The research company says of particular interest for those acquiring will be information security, internet of things and niches of the software sector.

“Two key trends will drive much of the action in software M&A activity: the move of business applications and IT infrastructure to cloud-based models, and the need for new data management capabilities to address the growing demand on IT resources anticipated from IoT,” 451 Research says.

The company says the digital transformation and analytics sectors will also help drive M&A activities during the year.

It identified more than 90 companies as potential A&A targets in 2016, with another 13 private companies – including MuleSoft, Host Analytics and Sumo Logic – identified as potential IPOs.

Brenon Daly, 451 Research financials research director, says “Though there will be billions in investment in these hotspot technology sectors, the deal making environment in 2016 has changed dramatically and the market will see a much slower growth environment, with a lower volume of transactions and a dramatic drop in valuations.”

Nearly two-thirds of senior investment bankers surveyed in 451 Research’s 2015 survey of investment bankers indicated they see deal pricing coming down in 2016, compared with just 14% who anticipated valuations ticking higher, something 451 Research says is almost a direct reversal of the typical valuation outlook over the past half-decade given by M&A advisors.

Corporate buyers are even more bearish than their advisers, at least when it comes to their mainstay transactions, with three-quarters of corporate development executives (74%) forecasting that the M&A valuation of private companies would tick lower in 2016 compared with 2015.

“A trend of lower valuations in 2016, if they take place, could mean significant bargains ahead for buyers,” 451 Research says.

Among the potential acquisitions tipped by 451 Research are IBM purchasing GitLab to own a key part of the development chain, and BMC purchasing Graylog to move further into DevOps.

The move into DevOps may also spark SolarWinds to purchase VictorOps or VMware to acquire HashiCorp, 451 Research predicts.

As DevOps creeps into traditional service management, ITSM providers such as ServiceNow may pick up startups such as DataDog or SaltStack to begin that transition, the company adds.

451 Research is also predicting a further upswing in acquisition activity around API management this year, with API management platforms representing some of the corre enabling technology needed for IoT platforms and hybrid IT integration.

The company says potential acquirers include Google and Rackspace, both of which are looking to better position themselves agains AWS and IBM, and communication service providers looking to bring IoT platforms to market, such as Verizon, along with tech vendors that serve those service providers, such as Huawei.

Information security too, is a market of rising importance, with enterprise security displacing mobility for the first time in five years in a reent 451 Resaerch survey of technology investment bankers.

451 Research says it tracked 133 deals in the infosec sector in 2015, totalling US$15 illion.

“Though overall security revenue continues to increase among companies in this sector, oversupply is a real concern and there is some evidence that growth is slowing for incumbents,” 451 Research says.

“The market is likely to see strong M&A activity in data security and identity and access management.

“In the data security space, two of the remaining independent data-loss prevention providers – Digital Guardian and Fidelis – have been evolving themselves into more broadly conceived data threat protection players, which could make them more attractive to incumbent security vendors.

“Potential acquisition targets in the identity and access management arena in 2016 include personal identity management companies CyberArk (NASDAQ: CYBRP), BeyondTrust and Thycotic, among others.”

On the IoT side, 451 Research is predicting increased activity in mega-mergers, with possible a tie-up of Intel and Qualcomm, Texas Instruments potentially acquiring Linear Technology, Analog Devices or Microchip, and Nvidia possibly acquiring MediaTek.

Follow Us

Featured

next-story-thumb Scroll down to read: