Tech Deals to Be Fueled by Non-Tech Buyers, BofA’s Bozdog Says

A recent boom in technology dealmaking is set to continue, according to Bank of America Corp.’s Chet Bozdog -- just don’t expect to find acquirers in the usual places.

In the span of one recent week, Qualcomm Inc. agreed to acquire NXP Semiconductors NV for $47 billion in the biggest chip deal ever and Broadcom Ltd. agreed to buy Brocade Communications Systems Inc. for almost $6 billion.

Including transactions by media companies, such as AT&T Inc.’s agreement to buy Time Warner Inc. for $85 billion, merger and acquisition volume for tech and media companies in October alone was the biggest monthly total in at least 12 years, according to data compiled by Bloomberg.

The dealmaking won’t stop, according to Bozdog, co-head of global technology media and telecommunications investment banking at Bank of America, but the companies doing the acquiring may look a bit different.

“Non-tech acquirers of tech companies will be a big reason why 2017 should be a great year for M&A,” Bozdog said in an exclusive interview last month at the Bank of America Merrill Lynch Tech Summit in Palo Alto, California.

Deals in which a technology company is bought by an acquirer from a different industry, known as a vertical acquisition, aren’t as common as strategic takeovers. But they make increasing sense, Bozdog said.

Growth Potential

A key reason is that non-technology companies want the growth offered by tech, Bozdog said. Acquisitions will be made easier by the fact that companies have cash on their balance sheets and investors have generally reacted positively to deals, he said.

Some management teams have decided to acquire businesses to develop more technical tools in-house as complex technology becomes a more central part of every industry. Last year, defense contractor Raytheon Co. agreed to pay $1.9 billion to acquire cyber-protection technology company Websense Inc., making it a division of the company.

Traditional consumer companies also have acquired e-commerce startups. Wal-Mart Stores Inc. agreed to buy Jet.com Inc. for about $3 billion in cash in a bid to beef up the retailer’s website amid its persistent battle with Amazon.com Inc.

Global deal volume reached about $489 billion in October, according to data compiled by Bloomberg, the biggest monthly tally since at least 2004. Technology, media and telecommunications deals accounted for about 41 percent of that total, or $200 billion, the data show.

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