The economy is finally lapping the coronavirus closures from March 2020, and in doing so, some areas of interest are showing strong growth.
U.S. information technology M&A, for instance, spiked in March this year, up 66.4% over last year by deal volume, with 243 deals for the month. March U.S. deal volume was led by three 10-figure transactions registered in three separate subsectors. Those hefty transactions also contributed to an all-time global record in tech deal values, according to 451 Research, an offering of S&P Global Market Intelligence.
Global spending on tech deals reached $302 billion during the first three months of 2021, more than full-year spending levels from a decade ago, 451 Research analyst Brenon Daly said in a report on the period. Helping drive the boom in tech consolidation was the rise of special purpose acquisition companies, or SPACs, as a primary vehicle for companies to go public through a reverse acquisition.
However, while they are filling in their blank checks with record sums, accounting for almost half the total M&A spending in the tech sector, SPAC buyers still represent only about 6% of total tech deal volume. The average SPAC transaction with an announced deal value landed at more than $2 billion, Daly noted.
In the non-SPAC deal space, March was led by Hitachi Global Digital Holdings Corp.'s eleventh-hour $9.50 billion bid for enterprise and product solutions provider Globallogic Worldwide Holdings Inc., which was announced March 31. The terms imply a sturdy price of 12.3x the trailing 12 months of revenues for Globallogic, and Hitachi said the transaction will create synergies across its lines of business and by "accelerating the advanced digital transformation of social infrastructure such as rail, energy, and healthcare at a global scale."
Canada Pension Plan Investment Board is listed as the seller for Globallogic after acquiring an interest in the tech company in 2017.
The Goldman Sachs Group Inc. will continue its run as a premier adviser in tech M&A. Canada Pension will tap that firm's team, along with bankers from JPMorgan Chase & Co. Canada Pension worked with JPMorgan in 2017 when it initially took its stake in Globallogic. Hitachi will take consultation from a Credit Suisse Group AG advisory unit.
Advisory fees were not disclosed by either the buyer or the seller, but it compares in size and sector to Computer Science Corp.'s 2016 $8.86 billion acquisition of Hewlett Packard Enterprise Co.'s enterprise services business, which produced the combined entity DXC Technology Co. During that transaction, RBC Capital Markets LLC advisers collected $22.0 million in fees, though fees were not disclosed for other advisers on the deal, which also included Goldman Sachs.
In another comparable transaction by size, Evercore Inc. advisers cashed $45.0 million when they consulted CSRA Inc. on its $9.95 billion sale to General Dynamics Corp. in 2018. While CSRA's products and services are similar to Globallogic, CSRA focuses on government clients and military contracts.
Two other transactions crested 10 figures for the month of March. Garnering the most headlines was identity tech firm Okta Inc.'s $6.50 billion run for competitor Auth0 Inc.
That will be the third largest information security transaction on record and Okta's largest, according to 451 Research. In a report, 451 Research calls the "blockbuster purchase" a "surprise," given Okta's already substantial footprint in the business and sparse M&A history. It has only spent about $70 million on three prior transactions combined.
It is a hefty price tag, with Okta paying an acquisition multiple just below its own public-market trading value, Williams Blair Securities analyst Jonathan Ho said in a note.
Advisers from Morgan Stanley will provide financial consultation to Okta in that transaction, while Auth0 has tapped Qatalyst Partners LP.
March's other large disclosed deal came from tech distributor and engineering services provider SYNNEX Corp., which bid $7.20 billion for Tech Data Corp. Tech Data runs a similar business, but focuses on end user devices and networking services where SYNNEX's legacy business targets data center and IT equipment.
Financial advisers were not yet disclosed for that transaction.