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Information Technology

Portfolio M&A

By Jason R. Koepke, on Oct. 10, 2016

Wealth Builders Portfolio members have participated in the ongoing wave of information technology (IT) mergers and acquisitions (M&A) to build improved market position. Part of a broader trend, steady M&A activity reflects the continued health of the tech sector, although of the risk of a pullback or even a recession merits caution.

For months, the financial media worried that the lack of initial public offerings (IPO) in tech meant either Silicon Valley wasn’t producing companies good enough to make it in the public markets or that investor sentiment had collapsed and we were in for a rough time. Neither has proved true.

In To IPO, or Not to IPO?, we challenged the conclusion that tech is in trouble by pointing to the limited data used to back this assertion and the continued flow of private-market dollars into these companies. Yes, 2015 wasn’t as good for IPO enthusiasts or fundraising as the previous year, but it fit within the trend.

Furthermore, 2016 appears to continue with what should be investors’ expectation, presuming they look at more than a couple quarters’ worth of data. For example, in the first three quarters of 2016, there have been 11 tech IPOs in US markets for a total valuation of $1.5 billion dollars. Compare those numbers with 2015’s two tech IPOs at $168 million, according to PWC.

Given how many deals are occurring and the shifting technology space, it’s not a surprise that Wealth Builders Portfolio members are in the mix.

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