If any industry has stood out in recent months when it comes to M&A activity, it's been technology. But more specifically, the narrative has been one of large tech firms purchasing specialized small to mid-cap companies at fairly attractive premiums.

The list is long, ranging from Intel’s (NASDAQ:INTC) purchase of McAfee (NYSE:MFE) last month to the bidding war between Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL) over data-center company 3Par (NYSE:PAR). Other recent deals include Oracle’s (NASDAQ:ORCL) purchase of Sun Microsystems and Dell’s purchase of Perot Systems. And on Monday, H-P agreed to scoop up IT-security firm ArcSight.

In total, the technology industry has done approximately $262.7 billion in mergers and acquisitions since the beginning of 2009, according to data provided by Dealogic. While the dollar value on those deals doesn’t place technology in the top 5 for the past two years, the total industry volume of transactions – 8,848 as of last month -- is well ahead of Wall Street’s second-most active industry, the financial sector.

But unlike the financial sector, which saw a flurry of M&A activity when the financial crisis forced massive consolidation in the industry in both big and small banks, the technology sector has seen its transactions driven primarily by the large firms looking to put their massive amounts of cash to work. With the economy mediocre - at best - and flat business revenues, firms have begun to see a need to start broadening their product catalogue beyond their traditional specialties, analysts said.

“For the past 20 years, the biggest IT players partitioned the technology industry into their own respective fields,” said Toan Tran, head of technology for Morningstar. ”But now with revenues flat, they’re having to broaden their product offerings and once unrelated companies are now competing with each other.”

A good proportion of recent technology transactions have been the enterprise software and hardware sector. Dell’s purchase of Perot Systems earlier this year was a direct bid to move Dell, what was traditionally a low-cost PC maker, into the more high-margin integrated software and hardware business. When traditional enterprise software maker Oracle purchased Sun Microsystems, it introduced into the hardware business for the first time in its history.

All these transactions are being fueled by the massive amounts of cash these companies have on their over-capitalized balance sheets. Looking at the 20 companies with the largest cash reserves in the S&P 500, seven are in the technology sector based on data compiled by FactSet. When using cash versus market capitalization, technology represents four out of the top five.

With this large pile of cash, the sector has been ripe for consolidation for awhile, analysts say, with  the initial fuel for consolidation coming with last year’s recovering stock market and a relatively weak economy. Executives are reluctant to return cash to shareholders in the form of special dividends and the economy has made hiring less than attractive, leaving very few options open for C-suite occupants.

“For the first time in a long while we have a unique combination of externalities of strong cash flow and balance sheets combined with the slow economy that makes M&A a strong possibility,” said Scott Kessler, head of the technology sector for S&P Equity Research.

Sticking with the theme of enterprise software and hardware, the targets in this M&A wave have been specialized mid- or small-cap specialty businesses that dominate one or more smaller sectors in technology. Intel’s purchase of virus firm McAfee was sold to investors as a way to get specialized security algorithms integrated into Intel’s chips. Both Dell and H-P wanted 3Par because the company’s data storage expertise is becoming more important as more enterprise software products are moved onto server farms and storage arrays.

“These large companies have very good brands and by purchasing lesser-known but good companies it helps them expand business and brand even with organic sales stagnating,” said Kessler.

On the other side of the transaction, the CEOs and board of directors for companies like 3Par are meeting business-model ceilings – having good assets but the inability to mass distribute and market their products.

“3Par will be worth more inside of H-P than if it would have remained a standalone company,” Tran said.

There are few signs that the recent wave of tech M&A is about to end. While some names like Intel have spent a good majority of their cash reserves, some of the largest names out there like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) remain flush with cash. Both companies are not expected to make any multi-billion dollar acquisitions soon because of each company’s tendency to develop products in-house, but it is likely both companies will continue their pattern of purchasing smaller firms as needed. And with Dell losing its battle for 3Par, it is likely that the company will go after another company similar to 3Par as a potential suitor.

“The cash on the balance sheets is earning little to nothing for these companies right now, especially with interest rates so low,” Tran said. “Either they are going to have to return that cash to shareholders, or start using that money to purchase attractive assets.”