Groupon inc., the Internet-coupon service with more than 35 million users, may be among those going public in 2011. Photographer: Tim Boyle/Bloomberg
Jan. 3 (Bloomberg) -- James Woolery, a partner at Cravath Swaine & Moore LLP, talks about the outlook for merger and acquisition activity within the technology industry. Woolery, speaking with Jon Erlichman on Bloomberg Television's "In the Loop," also discusses the performance of Facebook inc. and the outlook for capital investments from technology companies. (Source: Bloomberg)
Jan. 3 (Bloomberg) -- Robert Breza, an analyst at RBC Capital Markets, talks about the outlook for consolidation in the technology industry and his views on Microsoft Corp., Oracle Corp., Salesforce.com inc. and Adobe Systems inc. Breza speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Technology companies that fueled morethan $100 billion in acquisitions last year are likely to spendmore in 2011 in a race to harness surging demand for cloudcomputing and security services.
Intel Corp., Hewlett-Packard Co. and International BusinessMachines Corp. led purchases of more than 2,700 companies andstill spent only a fraction of the cash piles they accumulatedduring the recession. the dollar amount of announced tech dealsgained 12 percent, lagging behind a 26 percent jump in worldwidemergers, according to data compiled by Bloomberg.
“I’m bullish” on 2011, said Larry Sonsini, chairman andco-founder of Wilson, Sonsini, Goodrich & Rosati, the Palo Alto,California-based law firm that worked with security-softwaremaker McAfee inc. on its $7.7 billion agreed sale to Intel.“When I look at enterprise clients, I see they are poised toinvest in growth on a global basis.”
Buyers aim to capture the $3.4 trillion in information-technology spending projected by researcher Gartner inc. for2011, a 3.5 percent increase from 2010. Cisco Systems Inc. and Oracle Corp. are among IT providers driving the convergence ofservices, software and hardware as they compete to become themost relevant to chief technology officers. more companies aremoving to cloud computing, allowing them to access informationover the Internet from external data centers.
Sonsini’s firm worked on 62 technology acquisitions valuedat a total of $16 billion in 2010, including the McAfee takeover-- the biggest deal in the industry last year. from his vantagepoint in Silicon Valley, Sonsini predicts an increase in manytypes of tech transactions this year.
“Starting at the bottom of the enterprise ladder such asventure financing, we will see active investments in importantareas such as cloud computing, clean technology, alternativeenergy, life sciences and Internet,” said Sonsini, whose firmhelped take Google Inc. and Apple inc. public.
Venture capitalists are also pushing for paydays after adearth of initial public offerings during 2008 and 2009.Worldwide, 94 technology companies held IPOs in 2010, up from 54in 2009, according to Bloomberg data.
Groupon inc., the Internet-coupon service with more than 35million users, may be among those going public in 2011. TheChicago-based company walked away from a $6 billion takeover bidfrom Google in December and will decide this year whether tosell shares in an IPO, a person close to the situation said lastmonth. Groupon has also filed to raise as much as $950 millionfrom the sale of preferred shares.
“The increase in global tech IPOs in 2010 bodes well forM&a in the industry” in 2011 and beyond, said Drew Guevara,head of West Coast technology investment banking for MorganStanley, which advised Groupon together with Allen & co.
“Goingpublic both establishes a company’s market valuation and createsthe potential to achieve higher value downstream through asale.”
Morgan Stanley topped the 2010 league table of financialadvisers in the sector with 40 deals worth about $28 billion,followed by Goldman Sachs Group inc. and JPMorgan Chase & co.New York-based Morgan Stanley advised McAfee in its sale toIntel, video-storage provider Isilon Systems inc. in itstakeover by EMC Corp., and ArcSight inc. in its sale to HP.
Speculation about who will be next has already boosted thestocks of the fastest-growing companies. F5 Networks Inc., whosesoftware helps companies manage Internet traffic, more thandoubled in 2010. Riverbed Technology inc., a provider ofequipment to boost networks’ speed, more than tripled. AcmePacket Inc., a maker of devices that help networks transmitphone calls and video, quintupled as investors bet on continuedrevenue growth and a possible sale.
Managing Expectations
“In this environment, managing the market’s expectationsis always a challenge,” said Ken Goldman, chief financialofficer of Fortinet Inc., the Sunnyvale, California-based makerof network-security systems, whose market value increased byabout 80 percent in 2010. “The risk of missing the targetednumbers even by a tad is always greater than overachieving.”
A buyout of Seagate Technology Plc failed to materializelast year after the disk-drive maker ended discussions withprivate-equity firms, saying the indicated deal value wasn’t inthe best interest of the company or its shareholders. TPGCapital, which had taken Seagate private once before already,couldn’t find enough equity partners to finance a takeover afterother leveraged buyout firms lost interest, one person withknowledge of the matter said at the time.
“LBOs will continue to be hard if not harder in 2011, asfinancing is getting more expensive” said Morgan Stanley’sGuevara. his firm and Wilson Sonsini worked for Seagate.
Guevara, who is based in Menlo Park, California, said heanticipates deals in cloud computing will continue to be strong,followed by security technology. most of the potential action instorage computing already has already taken place, he said.
HP, the world’s biggest personal-computer maker, boughtdata-storage company 3Par inc. for $2.35 billion, after an 18-day bidding war with Dell Inc. more than tripled the company’sshare price. in total, HP announced 9 purchases last year,including the $1.2 billion acquisition of once iconic handsetmaker Palm inc. IBM, the world’s biggest computer-servicesprovider, announced 16 purchases in 2010.
“In the last few years more data has been created andstored than in all of human history,” said Eric Mandl, globalhead of software banking at UBS AG in New York. his firm advisedIBM on its $1.7 billion purchase of data-warehousing companyNetezza Corp., and Dell on its $960 million purchase of data-storage company Compellent Technologies inc. “Ultimately thecompanies that offer technologies to solve problems associatedwith the data explosion will be the winners.”
To contact the reporter on this story:Serena Saitto in New York at ssaitto@bloomberg.net.
To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.
Technology Takeovers May Accelerate in 2011 as IBM, HP Push Into the Cloud