1. The five-year bull run
Our data reveals that big business is on a five-year bull run for digital/tech M&A. The number of digital/tech acquisitions jumped by 32 per cent between 2013 and 2014, and since then has remained largely constant (despite a slight drop in 2017).
But while deal volumes remained steady, deal values rose dramatically over the same five-year period. The S&P Global 1200’s spending on digital/tech assets nearly doubled between 2013 and 2014 and doubled again over the following two years, rising to a new high in 2017 of $258bn.
In absolute terms, the S&P Global 1200’s digital/tech spend increased by almost 600 per cent between 2009 and 2017 and more than tripled as a proportion of their total M&A investment – from 6 per cent in the first year of our study to 20 per cent in the last.
Our data shows that big business is more willing than ever to pay large sums for digital/tech assets, reflecting the often existential importance of digital transformation in an increasingly connected world. Indeed, our analysis reveals that the S&P Global 1200 are now spending more on the average digital/tech deal than they are on non-digital assets – and the gap is growing.
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Digital bets are getting bigger
The willingness of the S&P Global 1200 to bet big on digital/tech deals – whether or not those targets are making money at the time– is also a sign of the long-term potential returns that buyers expect to realise from assets such as semiconductors, data or online platforms. Likewise, the public markets generally reward businesses that are active in the digital space – a recent study by EY for example revealed that between 2012 and Q2 2018, the total stock return of digitally acquisitive non-tech businesses was on average 40 per cent higher than that of industry peers who did fewer tech deals.