Over the past few years, some of the big players in tech – such as Oracle Corporation (Nasdaq: ORCL), SAP (AG) (NYSE: SAP) and Microsoft Corporation (Nasdaq: MSFT) – have been been aggressive with M&A. Even after the dot-com bust, there is still a lot of excess capacity in the tech world.
However, according to a report from the 451 Group, it looks like the recent instability in the financial markets is taking a toll on things. After all, Lehman Brothers no longer exists and other major investment banks have radically changed their business models, such as Morgan Stanley (NYSE: MS) and Goldman Sachs Group, Inc. (NYSE: GS).
Looking at Q3, the dollar-value of tech deals plunged by a third to $37 billion. In fact, there were only six deals in excess of $1 billion.
Then again, with the tight credit squeeze, it's exceedingly difficult to get deals done. For instance, there were only 12 leveraged buyouts in Q3, which compares to 36 in the same period a year ago.
Of course, the financial shakeout has made many tech targets attractive. But, the problem is that the mega corporate buyers have also seen sharp reductions in market caps. And if the US economy continues to deteriorate, it's likely to cut into tech spending, making things even worse for dealmaking.
Tom Taulli is the author of various books, including The Complete M&A Handbook
