December 1, 2012
Interviewed by: David Snow
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Outlook 2013: The Tech Space

Jeffrey Liu of EY Capital Advisors shares his prediction that technology companies at mid-maturity (“adults or young adults”) will be targeted by private equity firms and how strategic M&A in the tech space will be more important than ever.

Jeffrey Liu of EY Capital Advisors shares his prediction that technology companies at mid-maturity (“adults or young adults”) will be targeted by private equity firms and how strategic M&A in the tech space will be more important than ever.

Privcap: What are your predictions for the technology space in 2013?

Jeffrey Liu, EY: One of the big predominant trends is going to be this class of adults or young adults that haven’t reached or are incapable of reaching a large enough scale to be successful as independent companies. These are companies that have slowing growth because, in part, some of the technology trends, like the cloud or big data or mobile, are displacing some of their traditional products that have grown nicely.

Other reasons are companies have divisions that they may have bought that have really taken away some of their focus and resulted in poor operating margins or product development. Those companies, I think, are squarely in the crosshairs of private equity either through outright acquisition and carve-ups or specifically to buy some of these divisions that don’t fit as separate entities and run them for cash flow or for other exit opportunities into better companies.

I do think that we are going to enter a market where strategic M&As continue to be relevant to financial M&A if you will, to private equity targets. More specifically because these trends, like the cloud and mobility, are really truly kind of transformative trends affecting the technology landscape.

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