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Private Equity Helps Q3 Tech M&A Jump 22%

Volatility may have slowed down M&A in third quarter but tech deals don’t seem to have suffered.

There were 759 tech deals worldwide from July to September, valued at $56.4 billion, according to Ernst & Young’s “Global Technology M&A Update.” This up 22% from the 700 deals that occurred in Q3 2010 that totaled $46.2 billion.

“Looking at the data, I would say that volatility did not [affect tech deals],” says Joe Steger, E&Y’s global technology transaction advisory services leader.

In fact, Steger says that the volatility may have helped moderate the expectations of sellers. There is still a divergence between the price expectations of buyers and sellers (sellers want big money for their companies while buyers don’t want to pay such high prices), he says.

Still, there were eleven deals in Q3 valued at more than $1 billion. Two transactions—Google’s $11.9 billion buy of Motorola Mobility and HP’s $10.2 billion acquisition of Autonomy—also topped the $10 billion mark. This is the first time that has happened since first quarter 2000, during the boom, when three deals actually topped $10 billion, Steger says.

Private equity also played a big role in Q3’s tech surge. PE was responsible for six of the top 11 deals, Steger says. This includes the KKR-led acquisition of Go Daddy for $2.25 billion, Blackstone’s $2.2 billion buy of Emdeon, and CVC Capital’s $1.9 billion buy of ConvergEx.

In fact, there were 81 PE-backed tech deals in third quarter, valued at $14.6 billion. This compares to 99 deals totaling $7.8 billion in 2010. Deal values have nearly doubled but the number of transactions has dropped 18%, according to E&Y data.

“Private equity has a lot of money available on the sidelines to put to work,” Steger says. “They want to take advantage of the recurring cash flows in the sector, of innovation and the growth opportunity that the tech sector provides. Deals are reasonably hot right now.”