Last year saw a 58% increase in the number of global technology transactions from 2013, the most in over five years, according to a new report from CB Insights. The study identifies 2,886 tech deals, with 79 IPOs and 2,809 M&A transactions taking place in 2014.
Continue Reading Below
The most active acquirer was Google (NASDAQ:GOOG.L), which purchased music streaming service Songza, high-tech utensil creator Lift Labs, and smart home technology maker Nest. Yahoo (NASDAQ:YHOO), j2 Global (NASDAQ:JCOM), Twitter (NYSE:TWTR) and Microsoft (NASDAQ:MSFT) rounded out the top five most acquisitive technology companies last year.
“A number of larger tech incumbents are taking advantage of large cash balances and making more acquisitions,” said Eric Liaw, partner at Institutional Venture Partners.
The year saw 32 deals for “unicorns,” tech companies with a valuation exceeding $1 billion, nearly double the 17 seen in 2013. Yet 41% of the tech transactions with disclosed prices were under $50 million.
Accel Partners backed more of the technology deals than any other venture firm, taking the lead from SV Angel. Kleiner Perkins, New Enterprise Associates and Battery Ventures also topped the “exit” rankings.
The United States led in tech deal activity, followed by the United Kingdom and Canada. India and Israel also made the top ten.
The strong deal environment also contributed to an increase in investment activity, with 2014 seeing the most dollars raised since 2000, with $47.3 billion in venture capital financing.
“It’s always easier to raise money after you’ve given some back,” said Jeff Grabow, Ernst & Young’s U.S. Venture Capital Leader, suggesting that venture firms were able to point to successful investments when raising new funds.
“Those same venture investors have turned right around and have gotten increasingly aggressive in their investment posture, which means there is ready access to capital for companies at all stages right now,” said Jeff Crowe, managing partner at Norwest Venture Partners.
Yet, the outlook for 2015 tech dealmaking remains unclear.
“I think that 2015 will start out as strong as 2014 ended,” said Crowe, but “sooner or later, these cyclically elevated valuations for tech companies are going to come back down to earth. Some set of events will occur that will turn everyone’s outlook negative, and the current frothiness will evaporate.”