Cloud Behind The Latest Spate Of Mergers And Acquisitions
September, 12th 2014
These days, everyone wants a piece of the cloud. Technology mergers and acquisitions are on a tear for a blockbuster year, and cloud computing is responsible for much of this burst of activity.
That’s the word from EY, which finds clouds lurking behind many transactions in its latest review of M&A activity in the second quarter of this year (April to June). In total, $52.4 billion in deals were conducted across the globe, a 57 percent year-over-year increase. Cloud and smart mobility directly drove 42 percent of technology deal-making, EY estimates.
The tech world is changing faster than ever, leaving even the most savvy vendors gasping for breath (witness Microsoft’s recent struggles to keep up with the shift to mobile and cloud). The rise of cloud models means the rise of new players. The market goes to those who assemble the right mix of skilled staff and technology innovation to offer the most compelling value proposition to customers. Sometimes, parts of that combination can be bought. Cloud means new methods of delivery, new product sets, and radically changed customer expectations.
Cloud drove many lucrative deals in recent months. Of the dozen 2Q14 deals greater than $1 billion, three-quarters targeted internet or cloud/SaaS companies or firms linked to the so-called Internet of Things trend. Deal values increased across a broad swath of sub sectors. “Nothing less than a technology-induced reinvention of all industries has begun, moving toward ‘sense and respond’ relationships between businesses and their customers and driven by the five transformational technology megatrends: smart mobility, cloud computing, social networking, big data analytics and accelerated technology adaptation,” says EY’s Jeff Liu.
Some examples of cloud-fueled deals cited by EY include the following:
SanDisk Corporation acquired Fusion-io, Inc., a deal tied to the cloud-driven growth of high-performance data center storage solutions. Zebra Technologies announced a $3.5 billion deal to acquire the scanner business of Motorola Solutions. As EY notes: “Zebra executives noted in their deal-announcement conference call that the combined companies would have a range of technologies that enable mobile workers in the context of the IoT, including RFID sensors, ruggedized mobile devices and a cloud-based platform for developing IoT applications that can integrate, analyze and act on data from multiple sensor-based sources.” Cloudera Inc. acquired Gazzang, provider of cloud-based encryption software.
Fair Isaac Corporation (FICO) acquired Karmasphere, Inc., a Hadoop query construction and collaboration software vendor, to provide an interface for its FICO Analytic Cloud.
Microsoft acquired GreenButton, a provider of cloud middleware software, to add high-performance computing capability to its Azure cloud. Atos, an IT services vendor, plans to acquire Bull for $847 million. “Atos reportedly is seeking to capitalize on Bull’s strengths to become a larger player in cloud computing services, security and big data analytics,” EY reports.
The EY report observes that “cloud/SaaS technology was a key enabler for a broad spectrum of these deals, and many had security or big data analytics aspects — or both. The volume of deals targeting those three technologies all increased faster, on average, than total global volume.” Cloud/SaaS deals were about 70 percent higher in 2Q14 than their 2013 average quarterly volume, EY also states.