Tech M&A, IPOs were up considerably in the second quarter

Mergers and acquisitions in the tech space flourished in the second quarter of 2014, further extending the momentum that had built up in the first quarter.

The thriving M&A picture was helped forward by improving macroeconomic conditions, high equity markets, VC investment levels, and IPO activity.

So says PricewaterhouseCoopers (PwC), which released its findings in its U.S. Technology Deals Insights Q2 2014, an analysis of second-quarter tech deals in 2014.

Similar to the previous quarter, software and Internet M&A deals were most numerous. Deal values increased materially within the hardware and semiconductor sectors, PwC says.

The report says the overall number of technology transactions — 62 of them — increased by 87 percent over the second quarter of 2013. The transactions totalled $26.7 billion, while the average deal value was $430 million, a slight increase from $406 million deal average in the first quarter, PwC says.

However, the average deal value was down somewhat from the $510 million average of deals in the past 12 months. Four deals were valued at more than $1 billion during the fourth quarter.

“After a strong start during the first quarter of 2014, the second quarter followed suit with an increase in the number of technology deal announcements,” said Rob Fisher, PwC’s U.S. technology industry deals leader, in a statement.

Fisher says that while the number of new billion-dollar deals announced in the second quarter was in line with first quarter, the number of smaller and medium-sized transactions grew.

Technology IPOs picked up in the second quarter. PwC counted 22 new pricings with proceeds exceeding $5.1 billion. Twenty new IPO registrations were announced during the quarter, and, PwC notes, a number of unannounced IPO filings were filed confidentially under a dome of silence created by the JOBS Act.

“This upward trend in IPO markets combined with the tremendous pent-up cash balances of the leading technology players bodes well in driving the momentum of technology M&A through the remainder of the year,” Fisher says.

The software sector, which has traditionally been characterized by smaller deals, had the greatest aggregate deal value in the quarter. The 20 transactions coming from the sector totaled $4.1 billion. The number of deals grew 18 percent from the first quarter, while the overall value of the deals declined 44 percent from the first quarter. Compared to the second quarter last year, deal volume increased 150 percent and value increased 163 percent.

With the proliferation of Internet-connected and wearable devices, PwC sees the Internet of things continuing to evolve, with these trends driving the demand for specialized semiconductor components and software to enhance them. It also believes cloud, mobile, and social technology as drivers of new value in the sector.