M&A Activity in Technology Stocks Flourishes Even as IPOs Stall

The plunge in technology stocks this year has sparked an uptick in mergers and acquisitions even as initial public offerings (IPOs) have dried up.  According to Bloomberg data, buyers have announced $289.4 billion of U.S. tech-company acquisitions so far in 2022, up +43% from the same period last year.

Mega blockbuster deals this year are leading the surge in acquisitions after Microsoft (MSFT) announced a $68.7 billion bid for Activision Blizzard and Adobe (ADBE) announced a $20 billion purchase of Figma Inc.  The total pace of deals this year is on pace to top the record from 2021.  The surge in technology deals contrasts with U.S. M&A activity as a whole, which is down by about a third from last year.  Also, IPOs for technology companies this year has ground to a halt.

Rainmaker Securities said the weakening economy makes for a worse environment to go public in.  Since it’s unclear when economic conditions will improve, getting acquired may look like a more attractive outcome than waiting. “Companies will be challenged to raise money in this environment, and if they don’t have a good IPO option, they will be more likely to sell.”

Several mega-cap technology companies have made deals this year.  Alphabet (GOOGL) recently closed its $5.4 billion purchase of Mandiant, and Amazon.com (AMZN) purchased One Medical for $3.49 billion and bought IRobot for $1.65 billion.  The IPO market, however, has slowed significantly.  According to Bloomberg data, just 20 tech, media, and telecom IPOs have priced in the U.S. this year, raising $592 million.  At this point last year, 113 IPOs had raised $51.6 billion.

EquityZen Securities, a pre-IPO secondaries marketplace, said, “there’s a lot of uncertainty, but sponsors still have a lot of dry powder to get things done, and having a lot of cash is something of a waste in an inflationary environment.  We are shocked that we haven’t seen more M&A because this is an incredible opportunity to buy things at a huge discount.”

More Stock Market News from Barchart

• Stocks Climb after Five Straight Losing Sessions
• Traders Refuse to Take a Ride with LYFT Stock
• Stock Market This Week: Five Themes to Watch
• Unusual Options Activity for JetBlue Airways (JBLU) Sadly Makes Sense