10 Feb 2011
Despite a bounceback in tech stocks, many of the third quarter′s negatives worsened in Q4, especially for vendors. Venture capital funding fell again, M&A deals were hard to close, and demand for public stock offerings was weak outside China.
This matters because the competitive dynamics of the telecom market still depend on a steady influx of new start-ups. The best of this bunch can only prosper with a healthy IPO and M&A market, which provides backers with multiple exit options.
Last year was better than 2009 in this regard, but China’s 2010 pickup was far stronger than elsewhere. It is too early to tell if the 2H10 results are bad news for the industry, or just an inevitable result of a power shift towards China – or both.
Globally, M&A deals involving vendors were flat in 2010, with 251 worldwide, from 260 in 2009. The combined value of all the 2010 deals was $15 billion, 24% lower than in 2009.
There are signs, though, that the regulatory review of mergers is getting tighter, for various reasons. Most importantly, there are more jurisdictions involved, from the US, the EU, and more.
Now that China’s vendors are global powers, we can expect Chinese authorities to also get involved in reviewing deals. Ideally these reviews would be driven by considerations about economic efficiency, but “who is lobbying for what” is always a factor, unfortunately.
Right now, Huawei is asking a US court to put limits on Motorola’s sale of its wireless infrastructure assets to Nokia Siemens Networks. This comes just a few months after Sprint rejected Chinese vendors from a 4G shortlist under political pressure from an Obama administration official. There are almost always politics involved in M&A deals, especially cross-border deals.