The Technology, Media and Telecoms (TMT) sector posted strong M&A results in 2016, despite a lower number of deals than the record 2015 levels.
Although the number of deals was closer to 2014 levels, deal values were only marginally below 2015 figures, however, suggesting that bigger deals are driving the TMT M&A market.
The United States, in particular, saw a flurry of bigger-ticket deals, accounting for 80 percent of the top 10 biggest deals by origin, led by the proposed US$107.8 billion AT&T acquisition of Time Warner.
China was the second biggest originator of deals, albeit with largely lower value transactions.
“American and Chinese companies have focused on cross-border deals to counter slowing growth at home and, in the case of China, to acquire technology and meet upgrading demand of domestic consumers,” says Philip Isom, Global Head of M&A, KPMG in the US.
“The slowdown in deal volumes was probably attributable to increased global uncertainty in the run up to the US presidential elections, the potential impact of Brexit, volatile currency markets and other geopolitical factors,” says Isom.
Despite fewer deals overall, several high-profile mega-deals helped deal value remain high. As well as the AT&T Time Warner mega-deal, other landmark transactions include Qualcomm’s acquisition of NXP Semiconductors for US$47 billion and the acquisition of Level 3 Communications by CenturyLink for US$33 billion.
With several blockbuster deals announced during 2016, completed deal values at least look set to remain strong into 2017.
This ties in with KPMG’s M&A Predictor data, which also suggests a positive TMT deals market in 2017. Although forward P/E ratios, our measure of appetite, are predicted to remain largely unchanged in both the Technology sector (0 percent change) and the Telecoms sector (1 percent increase), the capacity to transact, as measured by net debt/EBITDA, is expected to remain very strong, driven by plummeting debt levels.