Despite the global pandemic, tech and telecom M&A hit a new record in 2020, topping $600 billion in total value.

That’s according to 451 Research, part of S&P Global Market Intelligence.

Tech and telecom M&A spending last year soared to its highest level since the dot-com collapse. And last year’s record performance came in a historically abrupt boom-bust cycle.

A recession-led decline that can last years only knocked dealmakers out of the market for a few months in 2020. By summer, acquirers’ pent-up demand, combined with Wall Street’s confidence in the tech sector to thrive, not just survive, during the pandemic, flooded into the tech M&A market

Scott Denne is a senior research analyst with S&P Global Market Intelligence.

S&P Global Market Intelligence’s Scott Denne

“Both spending and deals were up last year,” he said. “According to 451 Research’s M&A KnowledgeBase, acquirers spent $604 billion on 3,993 global tech targets, compared to $476 billion on 3,729 targets in 2019.”

Collapse and Recovery

Acquisition spending dropped in the second quarter of 2020 to its lowest quarterly level in a decade. However, the average totals for both the third and fourth quarters was more than six times higher than spring’s slump.

Last year was the busiest overall year for tech deals since 2016.

“Semiconductors accounted for three of the five largest tech acquisitions this year,” Denne said. “As a mature, cyclical industry, it’s not uncommon for chip companies to take up a big chunk of tech M&A spend. What’s unusual this year is that those companies fetched premium valuations. All three of them – Arm, Maxim and Xilinx – were valued at or above nine times trailing revenue. The median multiple for a $1 billion-plus semiconductor target, according to the M&A KnowledgeBase, is just 3.5 times since 2010.

The against-the-odds recovery in tech M&A even outpaced the stunning bull market rebound on Wall Street. On a total return basis, the S&P 500 climbed 18% in 2020, led by a 44% gain by the tech names in the benchmark index, according to S&P Global Market Intelligence.

Denne expects the momentum to continue in 2021.

“Though it’s impossible to predict how the entire year will unfold, the conditions that facilitated a strong tech M&A market in 2020 – a rising stock market, stabilizing IT budgets and an acceleration of digital living and working – are still in place,” he said.