Technology and Communications M&A Outlook 2008

The technology industries — semiconductors, software, life sciences, computers and networking and the investors that fuel them — profoundly influence our lives. Though the sector has matured over the past 25 years, technology companies wrestle with constant challenges. Access to capital, faster time-to-market, and finding and keeping the right talent is more critical than ever. So is managing stakeholder and financial market expectations. Likewise, convergence — now a common theme running through all technology industries — brings new and fundamental challenges to industry players.

Digital convergence — the effort to bring together computer, phone, recording and broadcast technologies to enable new, flexible uses of products and services within an all-digital environment — is leading to increased corporate consolidation, according to 64 percent of technology executives surveyed in a recent PricewaterhouseCoopers’ study. Companies are under pressure to gain footholds in digitally related markets, and are willing to spend considerable sums on M&A to reach their convergence goals.  But acquirers have learned from the mistakes of the past and are carefully assessing the commercial viability and fit of acquisition and alliance candidates.  Software developers are most likely to benefit from this trend, followed by business information content developers, wireless companies, entertainment companies, and electronic device makers.  Convergence was thought to be the driving force behind some large, recent transactions in the telco/cable equipment sectors.

Convergence also colors the ongoing battle for market share between cable companies and the RBOCs (regional Bell operating companies), forcing telcos to decide whether to spend money on capital expenditures or acquisitions.  And consolidation among enterprise software and
hardware companies is likely to continue in response to customer preferences for fewer vendors and solution providers.

SOURCE: PricewaterhouseCoopers