Read Arma’s view on how America’s biggest tech companies are likely to continue buying foreign companies, especially those based in Europe, despite the protectionist climate of 2017, on Forbes here.
US tech giants will continue to acquire companies abroad, particularly in Europe.
While we cannot predict how Silicon Valley will react to the protectionist political climate brought on by the Donald Trump administration, we think it likely that US tech giants will continue to acquire companies abroad, particularly in Europe.
Several macroeconomic forces have underpinned the increased appetite of America’s tech giants for foreign acquisitions. Pressure from activist investors to tap into international markets and the need to put cash to use in a low-interest-rate environment has prompted US-listed tech companies to use their overseas holdings to fund growth through acquisitions.
This can be seen in a number of recent transatlantic deals. For example, Arma Partners advised on the acquisitions of Vermilion Software, a UK FinTech software company, and CYMBA Technologies by FactSet, and of Automic, an Austrian business automation software provider, by CA Technologies. Further examples include the $2.4bn acquisition of Fleetmatics, an Irish GPS vehicle-tracking company, by Verizon; and of Simplgon, a Swedish 3D data-optimization specialist, by Microsoft.
Alongside these macroeconomic drivers remaining in play even as the political landscape evolves, a changing global technology landscape is necessitating more overseas investment.
Silicon Valley is no longer the sole and undisputed centre of the technological world. With the rise of cloud-enabled and online-based business models, tech businesses can be set up from anywhere in the world.
Pressure from activist investors to tap into international markets and the need to put cash to use in a low-interest-rate environment has prompted US-listed tech companies to use their overseas holdings to fund growth through acquisitions.
In particular, the European market is home to many promising, innovative tech companies, supported by a deep pool of engineering talent and financing, motivating US acquirers.
Silicon Valley is no longer the sole and undisputed centre of the technological world
Finally, technology is penetrating deeper into major verticals such as financial services, retail, life sciences, and oil & gas. As it becomes a key offering of major companies, they need technical expertise that they can’t develop organically and instead seek through acquisitions. For example, in 2016 Arma Partners advised Thomsons Online Benefits, a UK-headquartered software business, on its sale to NYSE-listed Mercer, a HR consultancy.