The number of information technology transactions continued to slide in May as compared to the prior year, but 2022's biggest megadeal to date supported overall values.
In May, the sector's deal volume retreated 21.5% year over year to 197 transaction announcements, similar to the declines posted in March and April.
However, chipmaker Broadcom Inc.'s $72.72 billion offer for enterprise software vendor VMware Inc. positioned the broader technology and telecommunications industry to post over $100 billion in aggregated value from May's announced transactions. This marked the year's second-highest month for deal values, according to 451 Research.
"The megadeals that have so far defined Q2 activity are unrepeatable and, in the case of Elon Musk's reach for Twitter Inc., quite precarious. But the fact of the matter is that they keep coming, overshadowing the reality of a slowed and structurally changed M&A environment," 451 analysts Samantha Tomaszczyk and Melissa Incera said in a research note.
Broadcom's offer lands in a difficult regulatory environment as legislators and regulators increasingly target Big Tech. Chipmaker NVIDIA Corp. ended its proposed $40 billion acquisition of Arm Ltd. earlier this year, citing "significant regulatory challenges." Broadcom itself saw its last major acquisition attempt scuttled when then-U.S. President Donald Trump blocked its proposed $117 billion unsolicited takeover of mobile chipmaker QUALCOMM Inc. in 2018.
As part of its contract with VMware, Broadcom agreed to pay a termination fee of up to $1.5 billion if the transaction does not close.
The Broadcom deal values VMware at 5.7x trailing-12-month revenue, above 451's average technology and telecommunications deal multiple of 4.3x for 2021 and 3.7x for the year to date, including the VMware transaction. It was the largest infotech deal announced both in May and for the year to date.
The Broadcom-VMware deal also ranked as the third-largest transaction overall in 451's M&A Knowledgebase, which covers tech and telecom deals since 2002.
Infotech's second-largest May deal, financial exchange operator Intercontinental Exchange Inc.'s $17.18 billion bid for financial technology firm Black Knight Inc., valued Black Knight at 11.6x trailing-12-month revenue. Average deal valuations for information management companies like Black Knight are running hot in 2022, at 12.7x trailing revenue versus 6.2x in 2021 and 2.7x in 2020, according to 451.
ICE will look to leverage Black Knight's tax data and property valuation analytics to streamline its operations and expand its mortgage technology offerings into secondary markets, ICE CEO Jeffrey Sprecher said following the deal announcement.
451 Research is part of S&P Global Market Intelligence.