We’re just halfway through 2017 and this year has undoubtedly been an exciting one for both startups and enterprises alike due to mergers and acquisitions. Within only the first week of January, a shift in the market was seen as transaction spend on M&A’s more than doubled from $16.1 billion in 2016 to $35.7 billion in 2017.
When looking at the rate and type of 2017’s various M&A’s, the most important thing to note is the increase in the valuation of deals, showing that more and more companies are willing to shell out high amounts of money for bigger and better technologies. In the United States alone, acquisitions average an impressive $1 billion per deal, and this number is only expected to increase.
Part of the reason for the rise in investment value is the fact that the market has seen a relative boost due to a change in the political landscape. The result of this is enterprises, who had previously kept their coffers full to ensure liquidity, now looking to spend more and grow quickly through acquisitions with complementary companies and/or products.
Intel’s Mega Move
When discussing 2017’s M&A’s, one can’t have a list that does not begin with Mobileye. The Israeli autonomous transportation technology company, that was acquired by Intel in March for a whopping $15.3 billion, signaled a drastic shift in the autonomous vehicle industry.
Beyond being an astronomical purchase amount for a company with little over 250 employees, the purchase signaled a new shift in the self-driving industry, with not so subtle hints that Intel is looking to become a market leader. According to Goldman Sachs, the autonomous car sector is expected to reach $96 billion by 2025 and $290 billion by 2035, and from the acquisition, it seems like Intel wants a large chunk of that.#autonomous car sector set to reach $290 billion by 2035 @Mobileye + @intel acquisition Click To Tweet
According to CNBC, Intel has given Mobileye “unusual autonomy” to continue their operations with Chairman, Amnon Shashua. This unique decision showcases Intel’s realization that part of the technological advantage of Mobileye comes from its structure, culture, and team, and wishes to keep that intact in order to reap the rewards down the line.
Samsung’s Push into the Automotive Industry
In March, South Korean tech giant, Samsung, announced that they would be acquiring Harman International Industries, a leader in connected car technologies, in aims to strengthen their footings in the automotive industry. The details of the $8 billion deal were finalized and as of March 13th, Harman International Industries was delisted from the New York Stock Exchange. The unexpected move instantly propelled Samsung into the top level of auto part suppliers by bringing in-house the name, reputation, and client list of Harman International Industries.
So why did they do it? From a purely monetary perspective, automotive electronics comprise more than 30% of the cost of a vehicle, and that number is expected to rise to 50% by 2030, making it a lucrative one for the tech giant to be a part of.
By merging with an already existing and well-established company, Samsung was instantly able to gain a strong market share in the industry and enjoy the relationships and years of R&D that HII put into getting to where they were.
HP Strengthening Storage Capabilities
The recent announcement that HP purchased Nimble Storage for around $1 billion cash shows that the tech company is looking to boost storage and rev up sales with the technology of the flash storage company. While HP already owns Simplivity (purchased for $650 million in January) alongside several other storage startups such as StorageApps, PolyServe, IBrix, 3PAR and more, the latest acquisition shows that they are continuing to invest in flash storage at a rapid rate.
According to the CEO of HP, Meg Whitman, the acquisition is part of the company’s strategy to focus on “high-growth and higher-margin segments of the market”. What the acquisition also signals to the world is HP’s desire to increase their market share in the digital storage department, as well as their belief in the rapid growth the industry will experience.
HP’s integration of Nimble Storage’s technology will enable the company to deliver better hybrid IT and storage solutions to customers as well as increase their cloud-based storage and software offerings.
What to Expect
It is clear that enterprises recognize acquisitions as one of the most efficient ways of adopting high-quality ideas and technologies and adopting them withing their company’s instantly and seamlessly. Because of this, we believe that the rate of M&A’s, but especially acquisitions, will continue to rise.
The optimistic market outlook will free up money companies previously stored up, and the expected federal reserve rate hikes could drive enterprises to make big purchases sooner rather than later.
If the first week of 2017 is any indication at all – the value of acquisitions will continue to rise, signaling that enterprises are looking to bring in more developed and mature technologies, and are willing to fork out big bucks to do it.