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Tech mergers and acquisitions to hold strong over next 12 months: poll

DESPITE a recent slowdown in mergers and acquisitions (M&A) activity, dealmakers expected technology M&A to remain strong over the next year, according to a survey of tech M&A leaders.

The semi-annual survey, conducted by law firm Morrison & Foerster, showed that 51 per cent of those polled expect deal flow to pick up over the next year when compared to the previous year, while only 19 per cent anticipate a slowdown.

This comes even as the total number of global tech and telecom deals in the first three quarters of the year has fallen in comparison to the past two years, on the back of "less shopping by corporate acquirers" including mainstays such as IBM as they find themselves facing pricey valuations and less suitable targets.

Some 45 per cent of respondents forecast that private company M&A valuations will remain steady, while 31 per cent are projecting a decrease.

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Robert Townsend, co-chair of Morrison & Foerster's global M&A practice group, said: "A significant percentage of dealmakers clearly expect tech M&A to have a strong and sustainable growth trajectory buoyed by new innovations and a healthy outlook for private equity spending."

Some 59 per cent of respondents forecast an increase in private equity (PE) activity while 53 per cent expect PE firms to be more competitive with corporate acquirers over the next 12 months.

According to 451 Research's M&A KnowledgeBase, 2017 marks the first year in history that PE firms have announced more tech acquisitions than public companies. This is partly due to a willingness to pay higher valuations. Some 66 per cent of those polled said that the valuations paid by PE firms are too high.

Meanwhile, the majority (88 per cent) of respondents believe that machine learning and artificial intelligence (AI) will be a strong driver of M&A over the next three years. This compares to 67 per cent who project that the Internet of Things will be a strong driver during the next three years and 39 per cent who expect the same from blockchain.