The value of deals in the technology, media and telecoms sector hit $174bn during the first three months of the year, the highest level since 2006, as some of the world’s largest companies battled to secure access to global consumers.
A surge in TMT merger and acquisition activity, up 65 per cent year on year, meant that the sector accounted for three of the five largest transactions worldwide in the three months to April, according to data from Mergermarket.
This spurt contrasts with a fall in activity in the energy, mining and utilities sector, and slower growth in consumer industry deals, where caution about the strength of economic recovery has continued to weigh on transaction volumes.
“If you look at what is going on in TMT, you have a picture of real health in terms of the value and volumes of deals,” said Paul Parker, global head of M&A at Barclays. “But the rest of the market has been fairly ambivalent, with fewer deals than many had expected based on the pipelines at the end of 2013.”
Of the deals announced in the first quarter, the most valuable is Comcast’s $68.5bn proposed takeover of rival cable operator Time Warner Cable. On Friday, Charter – the cable company that had spent six months pursuing its own deal with TWC – filed legal documents contesting Comcast’s bid, claiming it was subject to a “flawed process”. However, the competition between the rivals only emphasises the moves towards consolidation among “old” media companies in recent months.
At the other end of the TMT spectrum was Facebook’s $16bn acquisition of WhatsApp – the mobile messaging business that eschews advertising. The purchase, the third-largest so far this year, raised eyebrows from Wall Street to Silicon Valley as dealmakers struggled to justify the pricetag for a company that, as yet, has little demonstrable revenues.
But the theme of technology’s largest operators buying up businesses whose prominence is rising – even if their profits are not – is one that bankers and analysts expect to dominate the year ahead.
“It is the most interesting and disruptive time in the market I have ever seen,” said Gene Sykes, global co-head of M&A at Goldman Sachs. “The value of the technology incumbents is more at risk than it has ever been. The best way for the established tech companies to overcome the challenge of new forms of technology is for them to be venturesome, as some of the leading companies have recently demonstrated.”
But while the mega deals have captured the headlines, it is the steady turnover of midsized transactions that has helped differentiate the TMT sector. Largely driven by private equity firms selling companies they bought before the financial crisis, the number of TMT deals valued at more than $5m in the first quarter reached 346.
In Europe, too, TMT accounted for two of the highest-value deals during the quarter: Liberty Global’s purchase of Dutch cable operator Ziggo for €10bn and Vodafone’s takeover of Spain’s Ono for €7.2bn.