Activision is the latest tech company to target the debt market to fund its acquisition
In the prior part of the series, we discussed Activision’s (ATVI) plan to use $3.6 billion in offshore cash to fund the King Digital acquisition. The company plans to fund the remaining $2.3 billion through debt financing. It seems technology players see the debt market as a channel to fund their ambitious acquisitions.
2015 is expected to witness a record high in debt issuance
As the above chart shows, according to Dealogic and Goldman Sachs Investment Research, US corporate debt issuance is expected to hit a record high in 2015, on the back of an ongoing increase in M&A (mergers and acquisitions) activity, sponsor-backed IPOs (initial public offers), share buybacks, and increasing dividends, as the above presentation shows.
Dell along with its PE firm, Silver Lake Partners, stated that it is considering the debt market to raise the $40 billion it will need to fund the acquisition of EMC (EMC) along with VMware (VMW), the largest buyout in the technology industry to date.
The Carlyle Group’s acquisition of Symantec’s (SYMC) Veritas has been by far the biggest LBO (leveraged buyout) deal in the United States in 2015 to date. In an LBO, the acquisition is funded by taking on debt or borrowing funds.
In April 2015, Oracle (ORCL) issued $10 billion worth of notes in six parts, which was the fourth largest deal in 2015. Please read Why Bond Investors Are Skeptical about Oracle’s Bond Issuance to know more.
You can consider the PowerShares QQQ Trust (QQQ) to gain exposure to the tech sector. The ETF invests about 54% of its holdings in the technology sector.