Technology M&A Pipeline ‘Feels Very Healthy,’ Mendoza Says
By Will Robinson and Serena Saitto - May 10, 2012 9:37 AM PT
The pipeline for technology mergers and acquisitions “feels very healthy,” according to Elias Mendoza, the former head of M&A at International Business Machines Corp.
Mendoza, now a partner at Union Square Advisors LLC in New York, spoke today at the Bloomberg Enterprise Technology Summit hosted by Bloomberg Link. He was joined by Ned Hooper, Cisco Systems Inc. (CSCO)’s chief strategy officer, and David Berten, founder and partner of Global IP Law Group, a Chicago-based law firm.
Last quarter was the slowest three-month period for technology dealmaking in a year and two of the sector’s four biggest deals announced this quarter are patent sales, according to data compiled by Bloomberg. Mendoza and Hooper stressed that they expect smaller deals for innovative companies.
“Our bias has always been toward small deals. Our preference is early-stage innovation,” Hooper said. “Good M&A follows strategy, not the other way around.”
Patent sales have been among the largest deals this quarter as AOL Inc. (AOL) said April 9 it agreed to sell more than 800 of its patents and related applications to Microsoft Corp. (MSFT) for $1.06 billion. Two weeks later, Facebook Inc. (FB) agreed to pay $550 million for about 650 of the AOL patents and applications that Microsoft will purchase.
Strategic Options
Berten said Amazon.com Inc. may decide to enter the mobile phone market and acquiring Research In Motion Ltd. (RIM) would allow it to gain patents and take on smartphone makers like Apple Inc.
“They’re in the same position Apple was before Apple came out with the iPhone. They don’t have sufficient patents,” he said.
RIM, the maker of BlackBerry smartphones, was close to hiring a financial adviser to help it weigh strategic options, people with knowledge of the matter said last month. A spokesman for Amazon didn’t immediately respond to a request seeking comment.
Apple may resolve its patent dispute with Samsung Electronics Co. when a court-ordered settlement conference takes place this month in California, Berten said, potentially reducing the number of technology companies in the market to acquire patents.
“If those two companies resolve their differences, two major players who would otherwise be buying up patents to fight each other might not have the same incentive anymore to make those purchases,” he said.
Cisco is focused on making money by selling products rather than selling patents, Hooper said. RIM is “not something we’re looking at,” he said.
In the technology sector’s biggest deal this year, Cisco agreed to buy NDS Group Ltd. in a transaction valued at about $5 billion. The San Jose, California-based company is making its largest acquisition since 2006 to add software used in next- generation video services.
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