UPDATE: U.S. stock market is starting to ride a tech M&A wave
By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) -- Last week was a banner week for tech mergers with Facebook Inc.'s deal to acquire messaging service WhatsApp Inc., and that could point to a big year for tech deals, possibly the next big driver for stocks.
Tech companies are sitting on cash as organic growth becomes more difficult to come by, according to M&A analysts. So expect more deals, and a lot more M&A buzz that gets investors thinking about which stocks are ripe for buyouts.
Tech stocks outperformed last week. The tech-heavy Nasdaq Composite Index (RIXF) closed up 0.5% for the week, while the Dow Jones Industrial Average (DJI) closed down 0.3% and the S&P 500 Index (SPX) slipped 0.1%. Year-to-date results show much the same story: the Nasdaq has risen 2.1%, the Dow industrials has fallen 2.9%, and the S&P 500 has slipped 0.7%.
Late Wednesday, Facebook (FB) announced it was buying WhatsApp for $16 billion in cash and stock plus $3 billion in restricted stock units. The deal pushed down Facebook's stock price but it rebounded the next day, reaching a new high. Facebook reportedly beat out Google Inc.(GOOG) for WhatsApp.
Speculation also surrounded a possible acquisition of Tesla Motors Inc. (TSLA) by Apple Inc. (AAPL) given recent talks between Tesla CEO Elon Musk and Apple executives.
While 2013 was forecast to be a breakout year in M&A, the value of global M&A deals actually declined by 6% from 2012, and the number of announced deals slipped by 7% to the slowest period since 2005, according to Thomson Reuters data.
Technology M&A, however, has been a bright spot, especially with big ticket acquisitions. The value of tech deals jumped 65% to $188.2 billion last year, according to Ernst & Young, with cloud- and mobile-based technology at the forefront of the trend.