After a very strong 2015, in which m&a activity by value soared to record levels – exceeding 2007 highs, 2016 has started out with a series of earth tremors. Among other things, the price of oil (and several other commodities) dropped to lows not seen in more than a decade; the bottom seemed to drop out of the Chinese stock market; and the stock and bond markets in the US and Europe slid in seeming sympathy. Recently, several high flying tech companies raised capital at values lower than previously indicated. So what will 2016 bring?
We won’t be surprised if volatility continues in public equity and bond markets. The value of several Unicorns is likely to fall a bit closer to earth – while remaining strong in a historical context. But we see m&a and investor demand continuing quite strong for middle market companies that offer new exciting ways to manage and analyze massive amounts of data including Internet-of-Things (IoT) analytics, predictive analytics, machine learning, outsourced analytics services and vertically focused data services – regardless of what else is happening all around us. Wikibon, a community of technology professionals, projects that spending on big data initiatives will exceed $33 billion in 2016, up from $27 billion last year, and a recent Forbes survey notes that 90% of business leaders believe that big data will revolutionize their business operations the same way the internet did.
There was turbulence in 2015 too, but through it all the m&a market continued to flourish. Among others, there were:
We have no idea how long the volatility in public equity and bond markets will continue for. What we do see is that the world is changing – rapidly. The ability to use advanced analytic tools to help build a more effective business and generate stronger profit is a siren song that, if anything, calls louder in these turbulent times. A growing group of VC firms, private equity investors, and corporations have an idea of a future – and it involves Enterprise Data & Analytics. Their desire to own a piece of this market while it is still nascent is strong and the availability of innovative companies, cash, and debt at historically low interest rates doesn’t hurt.
It’s an interesting time to be in this market. We are bullish on this space, and are actively advising sellers, buyers, and investors on strategic transactions. If you have questions, please feel free to contact me or Jeff Trongone – our lead in this area.
Read our full Enterprise Data and Analytics Market Update here.