Improving economic prospects and large cash balances are fueling a notable uptick in mergers and acquisitions activity in the technology sector. According to global accounting and research firm EY, $188 billion worth of deals were made in 2013 in the technology sector, with the three worst quarters still totaling up to more than the whole of 2012.
Where there’s smoke, there’s fire, and that’s certainly true of activist investors and M&A in the tech sector. According to a recent report from Activism Monthly (Volume 3, Issue 3, March 2014), “74 activists launched public campaigns at technology companies globally during the past four years. Moreover, the amount of activist activity in the sector is growing, with the number of companies targeted increasing by 52% in 2012, and by 16% in 2013.”
Peter Lynch was one of the best growth investors of all time. As the Magellan Fund manager at Fidelity Investments between 1977 and 1990, he averaged a 29.2% annual return. Q1 2021 hedge fund letters, conferences and more The fund manager's investment strategy was straightforward. He wanted to find growth companies and sit on them Read More
Activists taking on larger companies
The Activism Monthly report also highlights the fact that activist investors are increasingly willing to challenge the management of the tech industry’s largest companies. “The size of companies targeted has also been growing. In 2011, the average size of an activist’s target was $4.6 billion, growing to $5.2 billion in 2012. The numbers become somewhat skewed in 2013, partly as a result of investments in Microsoft, Apple and Hewlett Packard… Yet even without these three mega-campaigns, the average market capitalization for activist-targeted technology stocks was $4.4 billion. In 2014 thus far, it is $7.8 billion.”
Starboard Value, Elliott Management and Icahn Enterprises are top tech activists
The report also points out that Starboard Value has been the busiest shareholder activist in the tech sector over the last few years, with Elliott Management and Icahn Enterprises LP (NASDAQ:IEP) (managed by Carl Icahn’s son Brett) in second and third place, respectively. “The most prolific activist investor among technology firms is Starboard Value, which has publicly agitated for various governance and strategy changes at 19 technology companies since 2010. Elliott Management, the $23 billion hedge fund run by Paul Singer is in second place with 11 campaigns, followed by Icahn Enterprises on 10.”
The Icahns are currently involved in a bruising battle with the management of online auction giant eBay Inc (NASDAQ:EBAY) regarding the divestiture of PayPal.