Tech CFOs predict a wave of M&A in 2014

CFOs believe mergers and acquisitions in tech will continue throughout the year, according to a new survey, with IP and patents being a big target

If the rate of mergers and acquisitions in tech makes your head spin, don't expect any of it to slow down throughout 2014 -- and expect intellectual properties and patents to be a big reason why.

Corporate professional services firm BDO USA polled some 100 CFOs of U.S. tech outfits for its 2014 Technology Outlook Survey and found them firm in the belief that mergers and acquisitions in tech would either stay at the same rate (40 percent) or increase over last year (43 percent).

It's a bit of a shift from the results of the same poll conducted over the two previous years, which at the time split around 60/20 between "stay about the same" and "increase significantly." But almost no one polled during the past three years has believed a decrease, modest or major, has been in the cards.

What specifically drives M&A activity is another major issue, and the two biggest responses to that question were technology assets and intellectual properties (28 percent), and revenue and profitability (30 percent). Market share came in a distant third at 18 percent, but those three motives have remained consistently atop the list -- more so than "engineering and research," "distribution channels," "geographic coverage," or "acquiring the target before a competitor does."

It comes as little surprise that IP would be one of the big three, given the sheer size of many of the patent deals in question (Google and Samsung, for instance). CFOs also believe those mergers are driven mainly by the need to grow strategically (as 72 percent of those surveyed claimed), rather than simply defending one's existing market position (28 percent). Those percentages, by the way, have remained around the same since the 2012 poll, a strong hint that the notion of a fat IP treasury as a road to market expansion predates the last couple of years' focus on stopping patent trolls.

So which subdivision of the IT world is likely to see the biggest M&A action? The overwhelming answer (60 percent): software, including cloud computing. Its jump to the fore came at the expense of social media, which showed up at 24 percent for 2014 after peaking at 33 percent for 2012. Hardware, life sciences, and "clean tech" all ran single-digit percentages after that. Odds are this means the age of major consolidation in the social media space is over, and that it's now up to the dominant players -- Facebook and Twitter, mainly -- to make the best of what they have.

CFOs also seem confident in their revenue going up in 2014, albeit not explosively. 67 percent said their revenues would increase for the year, although slightly less than a majority -- 46 percent -- believed it would only go up somewhere between 5 and 9 percent. 20 percent believed it would only go up by as much as 5 percent. And of those that predicted a decline, 77 percent estimated it would be somewhere between 5-9 percent -- with only 16 percent estimating less of a decline than that.

This story, "Tech CFOs predict a wave of M&A in 2014," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow on Twitter.

Copyright © 2014 IDG Communications, Inc.

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