M&A activity in the tech sector rebounded in the third quarter — these 3 charts show how

The mergers-and-acquisitions market in the tech industry rebounded in the third quarter after seeing a slump in the second.
The value of such deals hit $66.4 billion, which was more than double the amount from the second quarter.
Foreign companies and non-tech buyers helped to boost the number and value of such deals.

Companies of all kinds renewed their appetite for tech firms in the third quarter.

The value of tech-related mergers and acquisitions announced in the period hit $66.4 billion, according to a new report from consulting firm PwC. That was not only the highest total in nearly two years, it was more than double the value of the deals announced in the second quarter.

"After a lackluster performance in Q2 2018, the technology deals market regained its shine," PwC said in the report.

The firm predicted the deal market would remain robust going forward, despite some potential ups and downs. Funding was up in the quarter for startups, which often represent prime takeover targets as they get bigger, PwC said. And companies of all stripes are placing a premium on innovation and technology, it said.

"We remain bullish on the prospects for Technology deals regardless of the macro market trends," the firm said.

Broadcom's takeover of CA Technologies boosted the market

The deal market's third quarter rebound was driven in part by one big transaction — Broadcom's $18.9 billion deal to takeover of CA Technologies. Broadcom announced that deal just months after the Trump administration barred its attempted acquisition of Qualcomm on national security grounds.

But the deal market saw strength across the board. Some 485 deals were announced in the period, which was up 15% from the second quarter. More than half of those were for less than $100 million, while another 23% were valued at between $100 million to $500 million.

The quarter saw one other deal of more than $5 billion — Renesas' $6.7 billion planned acquisition of IDT. And it saw 12 deals valued at between $1 billion to $5 billion, up from just nine such deals in the second quarter.

PwC Q3 2018 M&A report — Chart on technology deal value and volume

Software companies were hot commodities

By far the most popular sector for acquisitions in the quarter was software. Around 250 deals involving such companies were announced in the quarter. The combined value of those transactions was $41.9 billion. That was up from a mere $9.9 billion in the second quarter.

Information technology services was a relatively hot sector as well. The number of such deals topped 100 and their combined value hit $8.8 billion. That was up from just $5.4 billion in the second quarter and represented the highest total value for the sector since 2016.

PwC Q3 2018 M&A report — chart showing Deal value and volume by sub-sector

Money flooded in from outside

A return of foreign buyers also helped boost the deal market. Some 75 deals in the most recent period involved foreign companies attempting to buy US tech firms. That was up from just 53 such deals in the second quarter. The total value of deals involving foreign buyers was $16.4 billion. That was up from $4.9 billion in the second quarter and was the highest total since the fourth quarter of 2016.

The Trump administration has been taking a harder line on foreign companies acquiring US technologies and tech firms, subjecting them to more thorough national security reviews. That's led to greater uncertainty over whether deals will go through.

In addition to a surge of foreign buyers, the deal market saw an influx of acquirers from outside the tech industry. The total number of deals involving non-tech companies reached 137 in the period, up from 80 in the second quarter. That was the highest level in more than two years.

Meanwhile, the value of deals involving non-tech companies hit $13.3 billion, up from just $5.5 billion in the previous quarter. That was the third highest total in the last 11 quarters.

PwC Q3 2018 tech M&A report — Chart on tech v. non-tech deals