Strong US dollar to increase number of tech M&A deals in 2016

18 Mar 2016

Tech trends to watch in 2016 include private equity firms buying fintech start-ups and activity in security software and SaaS, says Bank of Ireland

2015 was a record-breaking year for tech M&A deals, with 4,400 transactions resulting in deals worth $600bn. According to Bank of Ireland’s tech outlook for 2016, the strong US dollar will drive an increased number of tech M&A transactions, especially in fintech.

Among the key tech M&A deals in 2015 were Clanwilliam’s acquisition of Sláinte Healthcare’s Claimsure platform for €12m, the €115m sale of Realex Payments to Global Payments, the acquisition of Mobile Travel Technologies by TravelPort for $61.1m and the acquisition of Cork-based Trustev by TransUnion for $44m.

Bank of Ireland’s head of technology, Adrian Mullett, explained that the bank expects continued acquisitions in fintech and IT services, especially by US acquirers.

“Alongside traditional technology acquirers like Google, Microsoft, etc, we are seeing the growth of financial players, particularly private equity, looking for cash generative B2B business that can be grouped with other acquisitions. In fact, Coram research suggests financial buyers have three times the level of cash compared with pure tech buyers.”

Mullett cited the recent sale in January of CoreHR, a payroll software company, to private equity house JMI for an undisclosed sum.

According to Pagemill Partners, 2015 was a banner year for technology M&A deals, with nearly 4,400 transactions representing $600bn in total deal value. Some of the biggest acquisitions globally included the $63bn acquisition by Dell of EMC, Avago’s $37bn acquisition of Broadcom for $37bn, WDC’s acquisition of SanDisk for $19bn, Intel’s acquisition of Altera for $17bn and Nokia’s acquisition of Alcatel-Lucent for $17bn.

2016 outlook for Irish tech sector

Looking to 2016, Bank of Ireland predicts that software revenue growth in Ireland will remain at 15pc.

Sectors to watch in 2016 include security software, in which Ireland has a strong cluster of players like Daon and Adaptive Mobile driven by increased incidents around mobile device security breaches.

Another sector to watch in technology is software as a service (SaaS), where firms that have transitioned to SaaS stand to benefit from the ongoing move to subscription-based software.

Mullett said that, based on strong increases in lending demand, the bank expects to see a continued increase in funding to the sector.

The bank’s InnovFin fund – based on the European Investment Fund’s 50/50 Risk Sharing instrument – will provide a total of €100m to innovative companies over the next two years.

The bank said that its Credit Guarantee Scheme remains a key funding instrument in the Irish tech sector, and that firms in B2B software and services like ERP, analytics and HR are well positioned to take on senior debt.

Bank of Ireland also said that there is a growing trend of tech companies acquiring their own premises driven by growth in the sector, increasing rents and in some cases the desire to have tangible assets on the bank’s balance sheet.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years