1H 2018 INDUSTRY UPDATE
BILLION DOLLAR DEAL MANIA
The first half of 2018 has seen a surge in massive tech M&A. As displayed in the chart below, 2018 has already seen 10 deals announced at valuations of greater than $1bn. This dwarfs the 12 massive deals done in all of 2017 and puts 2018 on pace for a record year for billion dollar tech deals. Is this phenomenon a pattern or are we just catching up from an anomalous dip in 2017?
There is little question that we are starting to see some consolidation, with young tech markets beginning to mature, particularly those focused on offering advanced analytical insights on customers and commerce transactions. For instance, Adobe’s acquisition of Magento and its flexible ecommerce platform for $1.68bn has as much to do with the predictive intelligence analytics that Magento has developed through its Magento Business Intelligence Pro dashboards as it does with the digital commerce and order management solutions that it provides. The traction that Magento has developed shows that the hype around machine learning is producing actual results, which is why Adobe is able to justify an 11.2x TEV/Revenue valuation.
SDR believes that while the back half of 2018 may not offer the same level of billion dollar tech M&A activity as the first half, there will be a continued upward trend in these large deals overall…
Q1 INDUSTRY UPDATE
SAP MAKES LARGEST ACQUISITION IN THREE YEARS
SAP had been relatively quiet on the M&A front for several years (especially in comparison to other large software firms) until its announcement on January 29 that it is buying U.S.-based Callidus Software for $2.4bn. SAP acquired CallidusCloud for its cloud-based CRM solutions. SAP had somewhat lagged its largest competitors in percentage of revenue coming from cloud technologies, and CallidusCloud will provide SAP with a cloud-platform to build a best-in-class “intelligent customer experience suite.”
For context, it had been nearly three and a half years since SAP completed a larger deal – when it acquired Concur Technologies for $7.2bn in 2014. The Concur deal marked the completion of an acquisition spending spree of over $15bn in less than three years, which included the purchases of SuccessFactors and Ariba, both in 2012. But between the Concur deal and this January’s announcement, SAP had not announced an acquisition with greater than $350mm Total Enterprise Value.
By contrast, from the span of the Concur deal through 2017, Oracle completed more than twice the number of acquisitions with announced values of 28 times those of its German rival. Even excluding the huge Oracle/NetSuite deal, the value of Oracle’s acquisitions over that period were nearly 10 times those of SAP. SDR believes that the Callidus deal is likely the start of SAP taking a more aggressive M&A approach in 2018 and beyond, as they look to bolster their core offerings with a new wave of “smart” cloud-based applications. Likewise, we do not expect that Oracle will take a back seat in pursuing inorganic growth…
Q4 INDUSTRY UPDATE
TAX IN TECH
With the largest tax overhaul since the Reagan administration now signed into law, we know that business will benefit from the reduction in the corporate tax rate from 35% to 21%. Bank of America Merrill Lynch predicts that EPS could rise by 10.5% this year for S&P 500 companies.
The technology sector could be one of the biggest beneficiaries of the new tax rules that tax cash profits held abroad at 15.5%. Under the prior tax laws, foreign profits made by U.S. companies were tax-deferred if they were not repatriated back into the U.S. As a result, U.S. companies have kept huge cash balances overseas (Congress estimates that U.S. companies have $2.6 trillion in untaxed overseas earnings). U.S. tech companies in particular have hoarded massive cash piles overseas in order to avoid paying U.S. taxes on overseas profits. For instance, Apple holds approximately 90% of its cash overseas, while Microsoft, Oracle, Cisco and IBM all hold more than 80% of their cash abroad.
Assuming that these companies repatriate shiploads of cash back into the U.S., the question remains: what will they do with it? Many pundits believe that it will primarily be distributed back to company executives and shareholders. However, many tech companies may benefit in using their repatriated cash for strategic initiatives like M&A. The software segment is perhaps the most likely to see an uptick in 2018 deal flow as a direct result of cash repatriation since large software firms tend to have high international cash balances relative to market cap. Furthermore, large software firms may be able to speed up their cloud development and increase their addressable markets through heightened acquisition activity.
As we head into 2018, SDR is anticipating that these trends will impact M&A and growth investments in the technology sector:
- Big Investments in Automated Machine Learning
A significant bottleneck in enterprises rolling out major predictive analytics initiatives is the lack of experienced data scientists that are cross-skilled in coding (typically in R or Python), data cleansing and applying predictive modeling techniques. This is creating a large opportunity for companies focused on developing code-agnostic platforms that can automate data preparation and allow users to easily build models through a graphical interface.
- The AI Trillionaire Will Still Be a Lowly Multi-Millionaire in 2018
Mark Cuban was famously quoted in 2017 saying that the world’s first trillionaire will be an AI entrepreneur. This may be the case down the road, but the reality in 2018 is that deep learning and true AI are mostly finding real commercial traction in very specific vertical industry applications. Deep learning is exceedingly complex and requires a lot of very smart human intelligence to solve real-world problems. The best minds at the most respected tech companies in the world are working on deep neural networks and, consequently, platforms are getting better at optimizing hyperparameters…
Q3 INDUSTRY UPDATE
MACHINE LEARNING PUBLIC CONVERSATION TRENDS
In reviewing global public filings over the last several years, SDR has identified interesting trends for machine learning as a topic of conversation. In the first quarter of 2015, the phrase “machine learning” or “predictive analytics” was mentioned 368 times across global public filings (8.3 mentions for every 10,000 filings in the period). In the third quarter of 2017 there were 1,116 mentions (25.0 mentions for every 10,000 filings in the period). For each of the first three quarters of 2017, these mentions grew by at least 100% over the same quarter in 2016. Clearly, machine learning is increasing as a topic of public conversation. However, it should be noted that the year-over-year quarterly growth rate for mentions has dipped each of the last two quarters (119% in Q1, 112% in Q2 and 102% in Q3).
SDR anticipates that machine learning will continue to grow as a topic of public conversation. However, as investors in the public markets begin to ask for meaningful action and results from machine learning, companies may be less inclined to casually throw these terms around.
THE RULE OF 50
One common metric that technology investors often use to quickly evaluate the performance of tech companies is the “Rule of 50.” Companies whose revenue growth and EBITDA % sums to 50 or higher are considered “elite.” Companies where those two metrics sum between 40 and 50 are considered “really good.” In reviewing performance across SDR’s various technology segments, it may be somewhat surprising that a fairly unsexy space like Hosting & Data Centers would be the only segment as a whole that reaches the rarified air of the Rule of 50. However, with the proliferation of cloud data and outsourced IT the Hosting/Data Center industry is sort of like wrapping paper at Christmas – pretty much everyone needs it…
Q2 INDUSTRY UPDATE
ENTERPRISE VALUE IN MACHINE LEARNING
In the recent tech economy, as long as a company spelled “machine learning” correctly, it could expect to raise a round of capital around the concept of predictive analytics or artificial intelligence. It has been somewhat reminiscent of the days in the late 1990s when having an ecommerce website (i.e., eToys.com or Pets.com) was perceived as all that was needed to create lasting business value via this new advance in technology. In fact, it was not until July 19th of this year that the S&P 500 IT Sector index finally surpassed the 988.49 high set in March 2000. However, the capital markets seem to be figuring out where true competitive advantages lie, and which advantages can be monetized in the next phase of this rapidly advancing world of data-based prediction and automation of human decision. As CB Insights recently pointed out, investments in AI-centric technology companies dropped by 19% in Q2 2017 compared with Q1 2017. By no means does this mean that the space is less “hot,” but investors may be trending toward more than a modicum of discernment.
So what are ways that companies are finding that machine learning is driving real business value today? The first area where machine learning-focused companies are driving significant value is in making the historically labeled “black box” of the underlying algorithms more transparent. Until recently, the inner workings of the various modeling techniques (Random Forests, Gradient Boosting, Support Vector Machines, etc.) were difficult, if not virtually impossible, to trace and explain. For executives making decisions, it can be extremely tricky to trust outputs based on new big data-based paradigms when the “Why?” questions to a modeling output draw blank stares from the data scientists who built them. Very few management teams or boards have been willing to accept the “because the model told me so” defense. In fact, regulatory hurdles can be machine learning killers in certain industries or geographies. For instance, the European Union has introduced legislation (the General Data Protection Regulation) that will restrict automated individual decision-making that is void of explanatory power.
DataRobot, Inc. is one machine learning-centric company that has continued to successfully raise capital ($54mm Series C round in March 2017 for a cumulative $108mm of capital raised to date). DataRobot is directly addressing the transparency hurdles so that machine learning practitioners can readily communicate why a model does what it does. The company’s product documents the process that a particular algorithm goes through, records its out-of-sample accuracy, demonstrates sensitivity around the model’s independent variables, shows how individual adjustments to inputs impact outputs, and provides reasoning around each case-by-case prediction. For companies specializing in predictive analytics to gain wide acceptance and achieve scale within a given sector, and especially around specific data-based decisions, they will need to demonstrate the ability to easily let users “under the hood” in order to let decision makers get comfortable with their algorithms’ explanatory power…
Q1 INDUSTRY UPDATE
BUSINESS INTELLIGENCE PLATFORMS JOCKEY FOR MARKET LEADERSHIP
When Gartner released its latest Magic Quadrant for BI and Analytics Platforms in February, Tableau, Microsoft and Salesforce.com had made significant positive strides relative to the field. Acquisitions played key roles in this movement for both Salesforce.com and Tableau.
Salesforce.com purchased BeyondCore (itself a “Visionary,” according to last year’s Gartner report) in September 2016 to hasten its progress in smart data discovery – an AI-centric approach to data analytics that helps users find stories within the data without requiring them to build their own models. Tableau purchased Hyper last March to enhance its capabilities with unstructured data and, in turn, offer faster analysis of large data sets.
One company that experienced a significant slide in Gartner’s eyes was Alteryx. Gartner’s concerns about Alteryx stem from its lacking data visualization capabilities and historical reliance on filling in missing competencies in self-service data preparation among its partners. While Tableau, Salesforce.com and Qlik were active acquirers in 2016, Alteryx was not. Alteryx’s strategic path forward finally was revealed in late February when the company announced its intention to issue an IPO. On March 24, the company issued its $126 million public offering at $14/share. The IPO will provide Alteryx with the capital to address its perceived shortcomings as a full-service BI and Analytics tool…
Q4 INDUSTRY UPDATE
Despite the M&A fervor of 2015 seemingly overshadowing 2016 in terms of overall volume, 2016 still was the third-biggest year for M&A on record. But with a record year set in 2015, global M&A deal value did decrease by 17% from 2015 to 2016. However, on the tech side, 2016 came closer to matching 2015, with a reported $612.9 billion in global tech deals vs. $691.4 billion in 2015, representing roughly an 11% drop. Tech mega deals helped fuel the late M&A rally.
A bevy of mega deals dominated 2016 tech, including:
- SoftBank’s $31.6 billion acquisition of chip designer ARM Holdings announced in July
- Microsoft Corp’s $26.2 billion deal to acquire LinkedIn Corp, which was announced in June and finalized at the end of December
- Oracle’s $9.3 billion purchase of NetSuite, which was announced in July and closed in November
- More division occurred within HP, with Micro-Focus’s Q3 purchase of Hewlett Packard Enterprise (software) for $8.8 billion and Computer Sciences Corp’s $8.3 billion merger with HPE (enterprise services) announced earlier in 2016
ENTERPRISE SOFTWARE EATING THE ANTIQUATED CORPORATE & SMALL BUSINESS WORLD
Change is a constant in the ever-evolving enterprise software space, but several trends seem to have floated to the top. These trends largely are driven by shifting enterprise needs and even workforce demographic shifts. Across each segment of the enterprise including HR, Marketing, Sales, Finance, Operations and Supply Chain, software is becoming the means to increase productivity without increasing headcount. In 2016, enterprise tech was proven to be a highly lucrative investment as seen by the enterprise technology IPOs’ outperformance. The return of the tech IPO began in 2016 as we saw the average tech IPO return 26%+ post-IPO, with a majority of the IPOs focused on the enterprise.
The rise of enterprise SaaS was expected in 2016 and came to fruition. More companies in antiquated industries that previously feared technology now are intrigued and willing to try out the idea of a SaaS solution. Enterprise software companies took advantage of this opening in 2016. Acquirers including large tech companies and private equity groups are realizing the disruption of these SaaS solutions and continue to make add-ons to their product offering and investment portfolios…
Q3 INDUSTRY UPDATE
The Return of the Tech IPO
The lull in IPOs for the tech industry has subsided as more technology companies have successfully become public companies this year. Previously, the abundance of venture capital, low interest environment, increasing valuations in each round of financing and large opportunities for growth had discouraged technology companies from taking on the burden of being highly scrutinized public companies. However, in today’s environment valuations are more uncertain for later-stage venture rounds and the public markets have become a central strategy for companies to raise capital and provide exit opportunities for investors.
With companies such as Uber and Snapchat planning IPOs in the coming months, high-growth technology companies are viewing IPOs as a solid exit option. Looking at the recent performance of technology IPOs in Q3 2016, the focus on the enterprise has been a key ingredient for success. Almost all of the tech IPOs have been focused on the enterprise with the best performers Nutanix, Impinj and Twilio solely focused on delivering technology to the enterprise.
Although an IPO most likely is not the right option for most middle-market technology companies, the recent success of tech IPOs will fill the coffers of public tech companies with large amounts of dry powder. Combined with the high expectation for growth from public markets, acquisitions of leading middle-market technology companies are expected to be a key avenue for growth…
Q2 INDUSTRY UPDATE
Brexit’s Effect on Technology
Although the Technology sector performed well this quarter with many top stocks setting new highs, the effect of the Brexit decision in the U.K. was felt noticeably at the end of the quarter. Technology companies saw the brunt of the decline in the days after Brexit, with many stocks falling over 3% in one day. Many of our technology clients have inquired about the short-term effects of Brexit after seeing the impact on technology stocks, but there remains uncertainty about the long-term effects of the decision as well. Although not always obvious from the onset, we have seen historically that cooler heads usually prevail in the world of technology (at least eventually). Plus, most middle-market technology companies do not have a large exposure to the United Kingdom. The only apparent effect of Brexit so far is that it may make it even harder for technology companies to find talent, which has already been a tough endeavor without the recent Brexit decision.
Ever-Changing World of Enterprise Tech
The enterprise technology arena changed significantly this quarter with Microsoft acquiring LinkedIn for $26 billion, one of the largest tech deals announced in 2016. As reported by Re/Code, LinkedIn had a total of five suitors including Google, Salesforce and Facebook. So what was so valuable that five of the most influential technology companies would compete to acquire LinkedIn? According to Satya Nadella, Microsoft’s CEO, the deal is intended to combine the tools that workers use to get jobs done (i.e., Microsoft Office) with the professional network that connects workers. With over 433 million members, LinkedIn is one of the largest professional networks and provides key social data on Microsoft users. Integrating the Microsoft Office suite and the LinkedIn Professional network will pose an initial challenge, but if done successfully, Microsoft could achieve its dream of once again dominating the enterprise tech space…
Market uncertainty slowed the M&A momentum within the Technology industry in Q1. Many firms have chosen to forgo acquisitions until the market stabilizes, resulting in total transaction volume decreasing by 21% compared to Q1 of 2015. This recent decrease in deals is unlikely to continue when, as anticipated, previously dormant tech giants return to the M&A market. Shifting market dynamics and readily available capital by companies with significant VC backing and cash on the balance sheet are predicted to drive additional M&A for the remainder of 2016. The rapid pace of technological change and the fluid competitive landscape has many firms vying to capture market share from other, slower moving competitors. Specifically, firms are eyeing acquisitions of data analysis/visualization, hybrid cloud and cybersecurity firms, while the market opportunity still exists.
Cybersecurity, once one of the strongest-performing segments in the Technology industry, has re-emerged as a focus for strategic and financial buyers in Q1. Steady corporate demand for security solutions, solid revenue growth within the segment and the recent decline in share prices of cybersecurity companies all make this an attractive segment for acquisitions. Larger firms, such as IBM, are increasingly looking to acquire smaller cybersecurity companies with disruptive capabilities in order to gain a competitive edge over their peers. Symantec, a legacy leader in computer security, also received a strategic investment of $500 million from Silver Lake in order to execute on its transformation plan and to help remedy its recent missteps in the market.
Although most tech giants recently have reduced their M&A activities, two have bucked the trend in a bid to establish market share in emerging technologies. Instead of building expertise in-house, both IBM and Cisco continue to acquire startups, refreshing their product offerings and gaining a lead on new solutions in rapidly evolving segments. Cisco’s recently announced acquisition of CliQr for $260 million highlights this trend. As a leading provider of application-management solutions for hybrid cloud environments, the deal will help Cisco manage software running in its own data centers as well as external cloud providers.
The close of 2015 brought two significant trends to the Technology Industry. First, Tech giants such as Dell and Nokia were actively participating in “mega-deals” (>$10B), driving the overall deal value to an unprecedented six-year high. Mega-deals were up 135%, with 47 deals completed in 2015, compared to only 20 from the previous year. Highlighting this year of mega-deals was Dell’s announcement to acquire EMC, representing the largest pure tech acquisition in history. This deal will help Dell diversify from the personal computer market and create an enterprise technology powerhouse. As history has shown, in the aftermath of such mega-deals, tech conglomerates tend to step back from actively pursuing acquisitions in order to effectively integrate their newly acquired businesses. In this absence, a new generation of companies like Box, New Relic and ServiceNow have entered the playing field, resulting in increased middle-market M&A activity heading into 2016.
Moving forward into 2016 is a push to digitalize enterprises through automation of processes and cloud computing. Companies such as Webroot, a Colorado-based security-solutions firm, is utilizing cloud-based technologies to gain market share, and ultimately plans to compete against companies such as VMware, McAfee and other leading security-solutions firms. In addition, New Relic, a provider of analytics enterprise software, has transitioned its core focus to advancing Application Performance Monitoring (APM) to the cloud. In conjunction with the new middle market landscape being created and the large push for digitalizing enterprises, Rich Jeanneret of EY predicts that cross-sector partnerships or “industry mashups” will spearhead 2016 growth. This effort to work in tandem with other industries is expected to be a catalyst for M&A activity into 2016 and to create vast new applications and opportunities within the tech space. The most notable industry to implement cross-sector partnerships will be the automotive sector, as it continues to create autonomous vehicles.
Technology companies in the public markets have seen high volatility in the last quarter as growth has not met investor expectations. Overall trends in the tech industry, however, are positive as key drivers like the need for innovation and technology-spend continues to increase. Specifically in the enterprise market, there has been significant growth in SaaS adoption for Small and Medium Businesses (SMB). The SMB marketplace is realizing the benefits of gaining powerful software at the lower recurring cost of a SaaS model. Industries previously dominated by perpetual license models are now seeing increased utilization for SaaS.
Additionally, large tech companies continue to reevaluate their core focuses. Pressures mounting from investors to innovate and create growth has driven companies to rethink the way they operate. Most recently, Google’s restructuring and renaming to Alphabet shows the Company’s acknowledgement of investors’ pleas to have a more focused approach to growth. This transition will allow previous parts of Google like YouTube, Ventures, Life Sciences, Wing and X Labs to become more focused on their specific initiatives and goals.
In the M&A market, transaction activity has decreased by 26.9% YOY from Q3 of 2014 and 26.4% from Q2 of 2015. While transaction activity is down from all-time highs, due to a decrease in early stage deals, the overall transaction value is projected to be $3.7T in 2015, which represents levels not seen since 2007. Tech companies in the middle market with a niche focus and continued growth will be attractive to large tech companies looking to maintain their relevancy in the fast-changing industry.
Throughout the second quarter, the Technology industry grew due to the continued integration of technology into enterprise systems. As a result, the IT Services segment, which aids in the integration and use of new technology, grew by an annualized rate of 4.64% and is expected to reach $441 billion by 2020. A continuing trend that can be seen in the marketplace is the increasing accessibility to data via mobile devices, particularly within the Enterprise Software segment. During the quarter, Microsoft Corporation (NasdaqGS:MSFT) made two strategic acquisitions to improve its mobile business intelligence and data visualization offerings across Windows, iOS and Android devices. International Business Machines Corporation (NYSE:IBM) also expanded its offerings by acquiring a cloud hosting and platform-as-a-service provider to boost its lagging cloud computing services and increase mobile application performance & scalability.
The amount of capital spent on technology acquisitions in 2015 is projected to increase 44% compared to 2014. This increase in value highlights the substantially different positions between companies that develop the newest technology and companies that have to pay premium prices to acquire such advanced technology. Online Services continues to be a hotbed of transaction activity, with 72% of the transactions within that sector this quarter. Increased use of online services has led advertisers to increase their use of online search marketing and predictive analytics which are both anticipated to grow in the coming years. Though the industry has seen a slight contraction in the second quarter, many industry leading companies such as Facebook and Intuit have had success and are pointing the industry towards growth in the coming quarters.
The Internet of Things (IoT) is moving out of its buildup phase and landing at the center of enterprise applications in everything from industrial equipment and supply chain management to retail shopping experiences. As such, IoT is expected to drive increased demand for cyber-security services, network infrastructure, sensors, software applications, and also applications within data analytics. Companies across all industries will look to take advantage of the growth within mobile technology, Artificial Intelligence (AI) and cloud-based software. The enterprise cloud market is forecasted to grow from $70 billion to more than $250 billion, from now until 2017. Strategic and financial buyers alike will continue to drive high transaction prices as these new network-based businesses represent attractive targets, particularly as a result of low-cost computing and access to intellectual property and/or talent.
To date, the U.S. has received over 44% of the industry’s global deal value. Investors are particularly attracted to America’s relatively healthy growth rate, improving economy and open credit markets. This strong propensity towards deals in the U.S. market will only bolster the appeal of the Technology sector, particularly as tech-loving millennials will comprise a quarter of the nation’s population by 2025, in effect continuing to drive consumer demand. Even with the recent Federal Reserve interest rate hike, technology companies sit on large cash reserves and should remain stable. As of Q4 2014, $467 billion of global buyout fund dry powder remains idle. For that reason, the Technology industry remains poised to attract buyers and sustain healthy deal activity throughout 2015.
Technology continued to see high deal value and volume in Q4 2014. While basic computer hardware and devices are becoming commoditized, technology companies are creating value by developing new services, often as SaaS or cloud-based solutions, enterprise data management, and the Internet of Things (IoT). Large technology companies with a focus on hardware or other physical aspects of the technology industry are seeking targets that create value through technology services. Companies across all industries have prompted growth within the Technology sector through the construction of systems to capture data. The confluence of success among non-capital-intensive technology companies and continued low interest rates has prompted activity among financial buyers as well, and this high level of awareness among both strategic and financial buyers has driven high transaction prices.
US targets have been particularly popular because buyers see US economic growth and technological development to be more robust in B2B and consumer sectors. This interest is likely to continue as overall US economic outlook appears stronger and more robust than abroad. In addition, many large technology companies are sitting on large cash reserves, and as of 1H 2014, $486.4 billion of private equity dry powder remained undeployed. As a result, the technology industry is ripe and filled with buyers who will sustain deal activity through 2015.
The technology industry has continued to perform well in Q3, and it has experienced an even higher volume of M&A activity (91 transactions) than an exceptionally strong Q2 (75 transactions). Online services and application software continue to supply the majority of transactions—over two-thirds in Q3. Meanwhile, average trading multiples have continued to cool from very high levels in recent quarters.
Large technology companies are still sitting on large cash reserves, and their horizontal consolidation efforts within the middle market will continue as they try to keep pace with the ever-developing “internet of things.” An anecdotal case of this trend was the September-announced acquisition of Shopkick, Inc. by one of SK Telecom’s subsidiaries. SK Telecom paid about $200 million for the acquisition, which will further diversify SK Telecom’s business and provide an opportunity to upscale Shopkick’s market coverage.
Looking forward, other than staying relevant in an ever-changing, interconnected digital world, technology companies will need to protect themselves from non-practicing entities or “patent trolls.” These entities will continue to drive (a) revenue for companies like RPX Company that provide patent risk management solutions and (b) acquisitions of patent portfolios and businesses with similar, patented technology for the purpose of providing security against potential litigation.
The macroeconomic headwinds of slowed growth both domestically and in BRIC and EMEA countries did not decelerate M&A activity in the technology sector in 1H 2014. Experts’ mixed expectations for the sector were settled after Q2 posted a remarkable 90 US Technology M&A transactions, about twice the typical quarterly deal volume. Whereas deal volume soared, trading multiples cooled. With exception of the mega-deals, including the illustrious Facebook acquisition of WhatsApp for $19 billion in February, average trading multiples for the sector dropped below 30.0x EBITDA, which, notably, is still nearly three times higher than the S&P 500 average. With large cash reserves and customer expectations driving demand for scale, large IT companies are targeting the middle market, looking for horizontal consolidation and integration into new technologies to fill product/solution gaps at a faster pace than through their own R&D. It is difficult to expect that 2H 2014 M&A activity will match 1H, but middle market tech companies are positioned to experience exceptional activity. “If change was as easy as a directive, then the companies that made 1999’s Fortune 500 list would not need to say goodbye to 238 of their peers a mere 10 years later.” Q2 results suggest that today’s large companies are looking to M&A of middle market tech targets to remain relevant in an ever-changing business landscape.