increasing their investment in companies they believe can become long-lasting enterprises. Still, M&A activity will be greater in 2011 than in recent years simply owing to pent-up supply and demand. This is good for the investment community and those seeking to raise new funds in 2011 and 2012.
Much of this positive activity will be centralized in a host of attractive areas in 2011—areas where we’re seeing the largest amount of deal flow and interest within our practice. Cloud computing, for example, has clearly reached a tipping point in the enterprise. By 2020 both Google and Microsoft figure to be dominant in this world. In the meantime they’ll continue to acquire a slew of companies to help them grow in the cloud computing space.
Infrastructure IT will continue its upward march, particularly for products and solutions that increase efficiency and effectiveness and for those solutions, such as Web-based services, that are scalable with enterprise needs in real time. We also see strength in cradle-to-grave solutions that bundle software, services, and infrastructure. Market leaders continue to seek and acquire tuck-in technology that fills a hole or enhances traditional product lines. Companies that understand how they fit into their product ecosystem can strategically position themselves to be acquired by market leaders.
There are several key growth areas that will touch the consumer markets in 2011 as well. Mobile commerce solutions, long popular in Europe and Asia, are finally being adopted in the United States. This will also open up the mobile advertising solutions that have been a start-and-stop proposition with investors. Google TV and other Web-based TV solutions will trigger increased innovation and adoption in this area both in terms of hardware, delivery mediums, and security-enabled transmission as content owners and studios see the increased market opportunity.
In addition, with many IPO hopefuls, such as Foursquare, in the social media and Web content space, the notion that Web traffic can be monetized is now back in play. And it’s important to keep an eye on the move toward consumer-device connectivity, which will provide seamless integration between devices at home and in the office and link one’s social network, entertainment, business, and personal interests. In the past these had been segregated, but convergence continues to take place, hinted at by increased interest by investors and acquirers across traditional technology sectors.
The bottom line for the next year is that there will be plenty of innovation, lots of deals, and a good amount of investor confidence. The question, of course, is how this translates into upside. And only time will tell.
Ken Salgado chairs Moss Adams’ Technology & Life Sciences practice and provides audit, internal control, M&A, and IPO guidance to public and private companies in the technology, manufacturing, and venture capital industries.
Derek Dowsett is a partner in Silicon Valley overseeing the firm’s services provided to public and private technology and life sciences companies in Northern California.