Virus-driven tech boom fuels M&A activity in 2020

Wall Street witnessed lesser number of M&A deals in 2020 compared to last year, but there were some high-value transactions that drew the market’s attention. While the technology sector dominated the M&A space — as companies strived to add new capabilities in the wake of the digital shift — activity was relatively low in other industries.

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The early transactions of the year include the acquisition of Passage AI by ServiceNow (NOW) in January, as part of the enterprise cloud service provider’s efforts to boost its artificial intelligence capabilities. In another buyout, private equity firm Insight Partners agreed to acquire European data management firm Veeam Software in a deal worth as much as $5 billion.

Visa Adds Vigor

The M&A scene became more lively when credit card giant Visa, Inc. (V) clinched a deal to buy fintech startup Plaid Technologies for $5.3 billion in January, which is pending regulatory approval. However, it ran into trouble after the Department of Justice recently filed a civil antitrust suit seeking to quash the plan.

In a relatively smaller deal, market research firm Moody’s Corporation (MCO) closed the purchase of Regulatory DataCorp in February, spending about $700 million. A month later, Philadelphia-based analytics solutions provider Clarivate Analytics plc (CCC) added healthcare research firm Decision Resources Group to its fold in a deal valued at $950 billion.

In a move aimed at bolstering its 5G prowess, Microsoft, Inc. (MSFT) bought Affirmed Networks in the second quarter. According to unconfirmed reports, the latter was valued at $1.35 billion. During the same period, Palo Alto Networks (PANW) acquired network technology firm CloudGenix. The cybersecurity firm paid approximately $420 million for the deal.

More Action

After a brief lull, M&A activity gathered steam when workforce management company Kronos Incorporated (KRO) merged with Ultimate Software Group in April to create UKG, which is touted as the largest HCM company in the world. In June 2020, cloud software firm Salesforce.com (CRM) bought customer relationship management company Vlocity, Inc. in a $1.3-billion deal, more than three months after signing the agreement.

While the purpose of most M&A deals is to expand the business, there are companies that add new assets to achieve other goals like saving cost for customers. In such a deal, leading cloud data service provider NetApp (NTAP) bought Spot, a provider of compute management and cost optimization services for public clouds.

Semiconductor

In a high-value transaction that is expected to close in the summer of next year, semiconductor major Analog Devices (ADI) agreed to acquire Maxim Integrated (MXIM), a manufacturer of integrated circuits. The deal value is estimated to be $21 billion. In a similar move, rival chipmaker Advanced Micro Devices (AMD) clinched an agreement to acquire Xilinx (XLNX) for about $35 billion – one of the biggest deals of the year that is expected to complete by the end of 2021.

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In the second half of the year, cloud-communications platform Twilio (TWLO) purchased customer data platform Segment for $3.2 billion, less than a month after announcing the deal. Meanwhile, Microsoft is all set to include video game holding company ZeniMax Media in its gaming business. The deal, valued at $7.5 billion, will be completed in Q2 2021.

Stalled Bid

While the majority of the M&A initiatives either went as per plan or are on track for completion, there were misses like the controversial deal involving Oracle (ORCL), Walmart (WMT), and China-based social media platform TikTok, which has been banned in the U.S for unethical business practices. The proposal to create a new firm called TikTok Global, through acquisition, was scrapped after the companies failed to convince regulators about its merit.

Earlier this month, fintech firm Intuit (INTU) closed its $7.1-billion acquisition of consumer technology firm Credit Karma. The deal was announced in February. Another deal announced in early 2020 is the acquisition of GrubHub (GRUB) by UK-based food delivery firm Just Eat Takeaway. The $7.3-billion buyout is scheduled to close in the first half of 2021.

One of the top transactions of 2020 was announced towards the fag end of the year, involving two leading Wall Street firms – CRM powerhouse Salesforce.com agreed to acquire business communication app Slack Technologies (WORK) for $27.7 billion, in a deal that is scheduled to close in mid-2021.