702 Reform Negative swsdi 2015 Solvency



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Economy

Global Econ Low

The global economy will tank in 2015 no matter what.


Marvasti, Lombardi Financial research analyst, 2015 (Milad, “Global Economy Remains Weak; Another Recession Coming?”, 5-19, http://www.profitconfidential.com/economic-analysis/global-economy-verge-another-recession/)

It has been six years since the global economy and U.S. entered the worst recession since the Great Depression. While many are championing the economic recovery, on closer inspection, it looks like history might repeat itself sooner rather than later. U.S. Economy Grows at Slowest Pace Since WWII The rate of growth in the U.S has been dismal since the 2008 housing bubble and financial crisis topped the country into the worst financial disaster since the Great Depression. For example, before the Great Recession, the biggest economy in the world reported annual gross domestic product (GDP) growth of 3.8% in 2004, 3.3% in 2005, and 2.7% in 2006. Then the ripples of the Great Recession began to make themselves felt. In 2007, the U.S. reported a GDP of 1.8%, followed by -0.3% in 2008 and -2.8% in 2009. (Source: Worldbank.org, last accessed May 14, 2015.) Between the devastating recovery years of 2009 and 2012, the cumulative rate of GDP growth was nearly nine percent below the average growth rate for previous recoveries. (Source: Congressional Budget Office, last accessed, May 14, 2015.) The so-called recovery has been pretty uneventful. In 2013, the U.S. reported annual GDP growth of 2.2%; last year it was just 2.3%. In the first quarter of 2015, GDP came in at a dismal 0.2%. As it stands, weak recovery, massive budget deficits, and high debt level could push the fragile U.S. economy into another recession. China Economy Slowing Down China, the world’s second-largest economy, is also losing steam. Since 2010, the country’s GDP has been steadily declining from 10.6% to 7.4% in 2014. Not surprisingly, China’s money supply grew and investment growth sank to the slowest pace in over 15 years. (Source: Reuters, May 13, 2015.) The future remains bleak. For 2015, China’s economy is forecast to climb at around seven percent; its slowest pace in 25 years and well below historical averages. The People’s Bank of China (PBOC) has lowered its benchmark interest rate for the third time in six months. By lowering interest rates, the central bank is hoping to make borrowing cheaper and stimulate economic growth. Greek Debt Crisis Can Drive Eurozone Back into Recession After six years, Greece emerged from a recession in 2014. But that was short-lived; falling business confidence, national debt, and deflation have driven Greece back into a recession. To make matters worse, Greece’s government has not been able to cut a deal with the International Monetary Fund (IMF) to ease its debt crisis. Greece’s finance minister insisted on Thursday that he will reject any deal from international bailout creditors that does not help the country exit its economic crisis. (Source: abcnews.com May 14, 2015.) All told, I think that the signs of deteriorating economic conditions are set to emerge in late 2015 or early 2016. With this, don’t expect stock markets to perform the way they have been for some time.

The risk is high because governments have no tools left to intervene.


Chung, News AU correspondent, 2015 (Frank, “‘Like an ocean liner without lifeboats’: HSBC’s dire warning for global economy”, 5-27, http://www.news.com.au/finance/economy/like-an-ocean-liner-without-lifeboats-hsbcs-dire-warning-for-global-economy/story-e6frflo9-1227371228341)

THE world economy is in serious danger of falling into another recession — and if it does, governments have few tools left at their disposal to combat it. That’s the dire warning from HSBC chief economist Stephen King, who describes the situation as like being on an “ocean liner without lifeboats”. With interest rates at near zero across the developed world, record levels of public debt and little room for further stimulus spending, the conventional “monetary ammunition” that has been built up following previous recessions is all but non-existent. “In effect, the world economy is sailing across the ocean without any lifeboats to use in case of emergency,” he writes in a new report, ‘The world economy’s titanic problem’. That’s bad news. As the UK’s Telegraph points out, the United Nations has cut its global growth forecast for this year to 2.8 per cent — only slightly above the 2.5 per cent which used to be regarded as a recession. The biggest danger comes from China. If the Chinese economy weakens so much that the authorities have no other choice than to let the renminbi slide, it will have severe knock-on effect. “[In this situation, collapsing] commodity prices lead to severe weakness elsewhere in the emerging world,” Mr King writes. “The dollar surges, but the Fed is unable to respond via interest rate cuts. The US is eventually dragged into a recession through forces beyond its control.” And the situation in China is already worse than authorities are letting on, experts have warned. China accounted for 85 per cent of global growth in 2012, 54 per cent in 2013, and 30 per cent in 2014 — that figure is expected to fall to 24 per cent this year. “If there is only one statistic that you need to know in the world right now, this is it,” RBS economist Andrew Roberts told The Telegraph. In every recession since the 1970s, the US Federal Reserve has cut interest rates by a minimum of 5 percentage points. “That kind of traditional stimulus is now completely ruled out,” HSBC’s Mr King writes. “Meanwhile, budget deficits are still uncomfortably large and debt levels uncomfortably high.” While in the past, deep recessions have typically been followed by strong recoveries, this time around, “a deep recession has been followed by an insipid recovery: more L-shaped than V-shaped”. “Today, inflation isn’t just low. It is, arguably, too low,” he warns. When debt levels are low, interest rates are high and budget deficits are small, dealing with recessions is relatively easy, he says. “When debt levels are high, interest rates are at zero and budget deficits are large, dealing with recessions is a lot more troublesome.” Attempts in various global economies to “rebuild their ammunition” over the past six years have failed. The European Central Bank had “egg on its face” after trying to raise interest rates in 2011, only to be forced to drop them again. The danger for policymakers is firstly, that it’s hard to know in advance what the next financial crisis will look like; and secondly, that regardless where it comes from, none of the tools that have helped governments pull themselves out are available this time.

Emerging markets in particular are spiraling towards recession.


Wheatley, Financial Times, 2015 (Jonathan, “Emerging markets: The great unravelling”, 4-1, http://www.ft.com/intl/cms/s/2/ddd8caf0-d86a-11e4-ba53-00144feab7de.html#axzz3bMQVLmBe)

Faced with recession, decade- high inflation, a fiscal crisis and water rationing, more than 1m Brazilians took to the streets last month to protest against corruption and mismanagement in their government. In China, growth is slowing as property prices fall, propelling more than 1,000 iron ore mines toward financial collapse. The patriotic citizens of Russia, meanwhile, are deserting their nation’s banks, switching savings into US dollars. Such snapshots of growing distress in the world’s largest emerging markets are echoed among many of their smaller counterparts. Several countries in Sub-Saharan Africa are beset by dwindling revenues and rising debts. Even the turbo-powered petroeconomies of the Gulf, hit by a halving in the price of oil over the past six months to $55 a barrel, are moving into a slower lane. Though these expressions of distress derive from disparate sources, one big and insidious trend is working to forge a common destiny for almost all emerging markets . The gush of global capital that flowed into their economies in the six years since the 2008-09 financial crisis is in most countries now either slowing to a trickle or reversing course to find a safer home back in developed economies. Highest outflows since 2009 On an aggregate basis, the 15 largest emerging economies experienced their biggest absolute capital outflow since the crisis in the second half of last year, as a strong US dollar drove emerging market currencies into a swoon and investors grew nervous over the prospect of a tightening in US monetary policy, according to data compiled by ING. At the same time, low commodity prices slammed GDP growth rates across the developing world. These trends, analysts say, signal a “great unravelling” of an emerging markets debt binge that has swollen to unprecedented dimensions. Importantly, the pain inflicted by this capital flight is being felt beyond financial markets in the real economies of vulnerable countries and in a surging number of emerging market corporations that are forecast to default on their debts. “Certain parts of the world are looking really vulnerable,” says Maarten-Jan Bakkum, senior emerging market strategist at ING Investment Management. “Places like Brazil, Russia, Colombia and Malaysia, that rely heavily on commodity exports, are going to get hit even harder, while those countries that have borrowed most excessively like Thailand, China and Turkey also look risky.” Analysts say that while emerging markets have been the setting for several recent financial squalls, the current exodus of capital could herald more fundamental changes. Indeed, although the “taper tantrum” of mid-2013 — triggered by the US Federal Reserve signalling its intention to unwind its monetary stimulus — caused turmoil in financial markets, its impact on real emerging market economies was transitory. This time around, though, things look more serious. The International Monetary Fund said this week that total foreign currency reserves held by emerging markets in 2014 — a key indicator of capital flows — suffered their first annual decline since records began in 1995. Without steady capital inflows, emerging market countries have less money to pay their debts, finance their deficits and spend on infrastructure and corporate expansion. Real economic growth is set to suffer this year, analysts say. Capital Economics expects GDP growth in emerging markets to fall to 4 per cent from 4.5 per cent in 2014, as Russia slips deeper into recession, Brazil continues to struggle and China is hampered by its ailing property market. Underlying such sober projections is a sense that an inflection point has been reached with the end of the commodity “supercycle” and the advent of low oil prices. “What is going on is a great unravelling of the market conditions of the past 15 years,” says Paul Hodges of International eChem, a chemicals and commodities consultancy.

Mass Surveillance Good for the Economy

NSA spying helps businesses game an upperhand with investments.


Glaser, Editor at Antiwar.com, ’14 [John, “America as Economic Spy: NSA's Mission Is Self-Aggrandizement, Not Fighting Terrorism”, The Huffington Post, 1-23-14, http://www.huffingtonpost.com/john-glaser/america-as-economic-spy-n_b_4190948.html, RSR]

These have led to accusations that the U.S. is engaged in industrial espionage, using the spying capacities of intelligence agencies to gain an economic edge, instead of fighting terrorists. European Union Commissioner for Justice Viviane Reding this week expressed outrage over revelations that NSA was sucking up the communications of tens of millions of European citizens as well as heads of state like Merkel. "This has nothing to do with fighting terrorism," she said. "Maybe it has to do with getting commercial secrets to be sucked out." The White House explicitly denied that the NSA spies for economic warfare. "We do not use our intelligence capabilities for that purpose. We use it for security purposes," spokesman Jay Carney insisted. Dick Cheney, on the other hand, was more honest when asked about it, saying our "intelligence capability is enormously important to the United States, to our conduct in foreign policy, to defense matters, economic matters." In 1995, the New York Times ran an article headlined "Emerging role for the CIA: Economic Spy." It explained that industrial espionage was increasingly important in a post-Cold War world. Spying on allies for economic advantage is a crucial new assignment for the C.I.A. now that American foreign policy is focused on commercial interests abroad. President Clinton made economic intelligence a high priority of his Administration, specifically information to protect and defend American competitiveness, technology and financial security in a world where an economic crisis can spread across global markets in minutes. "The national security review highlighted the dramatic[ally] increased importance of international economic affairs as an intelligence issue," Robert Gates, then-director of the Central Intelligence Agency, stated in a speech in 1992. "Nearly 40 percent of the new requirements are economic in nature. The most senior policymakers of the government clearly see that many of the most important challenges and opportunities through and beyond the end of this decade are in the international economic arena." In this sense, the NSA is an instrument intended to serve the interests of centralized political and economic power in Washington. The corporate interests that are and always have been colluding with the state to rig the game in their favor are especially benefitted, as is the power and repute of self-serving politicians. "Terrorism" is currently government's favorite excuse for abridging the rights of millions of people and usurping more and more power for itself. Indeed, that's just about all we've heard from the NSA since Snowden's disclosures. That excuse is profoundly undermined by the facts, which reveal that the NSA, like the rest of the government's national security apparatus, is primarily interested in self-aggrandizement, not protecting Americans from foreign threats.

Mass surveillance is good for the economy – allows for economic espionage.


RT, ’13 [“NSA leaks: Years of spying on Mexico govt gave US investment benefits”, 10-22-13, http://rt.com/news/nsa-leaks-mexico-government-458/, RSR]

US electronic surveillance in Mexico reportedly targeted top officials, including both current and previous presidents. Intelligence produced by the NSA helped Americans get an upper hand in diplomatic talks and find good investment opportunities. The US National Security Agency was apparently very happy with its successes in America’s southern neighbor, according to classified documents leaked by Edward Snowden and analyzed by the German magazine, Der Spiegel. It reports on new details of the spying on the Mexican government, which dates back at least several years. The fact that Mexican President Peña Nieto is of interest to the NSA was revealed earlier by Brazilian TV Globo, which also had access to the documents provided by Snowden. Spiegel says his predecessor Felipe Calderon was a target too, and the Americans hacked into his public email back in May 2010. The access to Calderon electronic exchanges gave the US spies "diplomatic, economic and leadership communications which continue to provide insight into Mexico's political system and internal stability," the magazine cites an NSA top secret internal report as saying. The operation to hack into presidential email account was dubbed “Flatliquid” by the American e-spooks. The bitter irony of the situation is that Calderon during his term in office worked more closely with Washington than any other Mexican president before him. In 2007 he even authorized the creation of a secret facility for electronic surveillance, according to a July publication in the Mexican newspaper, Excelsior. The surveillance on President Nieto started when he was campaigning for office in the early summer of 2012, the report goes on. The NSA targeted his phone and the phones of nine of his close associates to build a map of their regular contacts. From then it closely monitored those individuals’ phones as well, intercepting 85,489 text messages, including those sent by Nieto. After the Globo TV report, which mentioned spying on Mexico only in passing, Nieto stated that US President Barack Obama had promised him to investigate the accusations and to punish those responsible of any misconduct. The reaction was far milder than that from Brazilian President Dilma Rouseff, another target of NSA’s intensive interest, who has since canceled a planned trip to the US and delivered a withering speech at the UN General Assembly, which condemned American electronic surveillance. Another NSA operation in Mexico dubbed “Whitetamale” allowed the agency to gain access to emails of high-ranking officials in country’s Public Security Secretariat, a law enforcement body that combats drug cartels and human trafficking rings. The hacking, which happened in August 2009, gave the US information about Mexican crime fighting, but also provided access to "diplomatic talking-points," an internal NSA document says. In a single year, this operation produced 260 classified reports that facilitated talks on political issues and helped the Americans plan international investments. "These TAO [Tailored Access Operations – an NSA division that handles missions like hacking presidential emails] accesses into several Mexican government agencies are just the beginning - we intend to go much further against this important target," the document reads. It praises the operation as a "tremendous success" and states that the divisions responsible for this surveillance are "poised for future successes." Economic espionage is a motive for NSA spying, which the agency vocally denied, but which appears in the previous leaks. The agency had spied on the Brazilian oil giant, Petrobras, according to earlier revelations. This combined with reports that the NSA hacked into the email of Brazilian President Dilma Rouseff, triggered a serious deterioration of relations between the two countries. While the NSA declined comment to the German magazine, the Mexican Foreign Ministry replied with an email, which condemned any form of espionage on Mexican citizens. The NSA presumably could read that email at the same time as the journalists, Der Spiegel joked. The Mexican Foreign Ministry issued a statement reproaching the US for its alleged actions. "This practice is unacceptable, illegal and against Mexican and international law," the statement said. The ministry stated that Obama promised to carry out an "exhaustive investigation" to determine who is behind the suspected surveillance. "In a relationship between neighbors and partners there is no place for the actions that allegedly took place.”

No Impact to Econ Decline

Economic decline doesn’t cause war.


Drezner 14, Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, Global Economic Governance during the Great Recession, http://muse.jhu.edu/journals/world_politics/v066/66.1.drezner.html

The final significant outcome addresses a dog that hasn’t barked: the effect of the Great Recession on cross-border conflict and violence. During the initial stages of the crisis, multiple analysts asserted that the financial crisis would lead states to increase their use of force as a tool for staying in power.42 They voiced genuine concern that the global economic downturn would lead to an increase in conflict—whether through greater internal repression, diversionary wars, arms races, or a ratcheting up of great power conflict. Violence in the Middle East, border disputes in the South China Sea, and even the disruptions of the Occupy movement fueled impressions of a surge in global public disorder. The aggregate data suggest otherwise, however. The Institute for Economics and Peace has concluded that “the average level of peacefulness in 2012 is approximately the same as it was in 2007.”43 Interstate violence in particular has declined since the start of the financial crisis, as have military expenditures in most sampled countries. Other studies confirm that the Great Recession has not triggered any increase in violent conflict, as Lotta Themnér and Peter Wallensteen conclude: “[T]he pattern is one of relative stability when we consider the trend for the past five years.”44 The secular decline in violence that started with the end of the Cold War has not been reversed. Rogers Brubaker observes that “the crisis has not to date generated the surge in protectionist nationalism or ethnic exclusion that might have been expected.”45 [End Page 134]


Most rigorous historical data proves no relationship between economic decline and conflict.


Brandt and Ulfelder 11—*Patrick T. Brandt, Ph.D. in Political Science from Indiana University, is an Assistant Professor of Political Science in the School of Social Science at the University of Texas at Dallas. **Jay Ulfelder, Ph.D. in political science from Stanford University, is an American political scientist whose research interests include democratization, civil unrest, and violent conflict. [April, 2011, “Economic Growth and Political Instability,” Social Science Research Network]

These statements anticipating political fallout from the global economic crisis of 2008–2010 reflect a widely held view that economic growth has rapid and profound effects on countries’ political stability. When economies grow at a healthy clip, citizens are presumed to be too busy and too content to engage in protest or rebellion, and governments are thought to be flush with revenues they can use to enhance their own stability by producing public goods or rewarding cronies, depending on the type of regime they inhabit. When growth slows, however, citizens and cronies alike are presumed to grow frustrated with their governments, and the leaders at the receiving end of that frustration are thought to lack the financial resources to respond effectively. The expected result is an increase in the risks of social unrest, civil war, coup attempts, and regime breakdown. Although it is pervasive, the assumption that countries’ economic growth rates strongly affect their political stability has not been subjected to a great deal of careful empirical analysis, and evidence from social science research to date does not unambiguously support it. Theoretical models of civil wars, coups d’etat, and transitions to and from democracy often specify slow economic growth as an important cause or catalyst of those events, but empirical studies on the effects of economic growth on these phenomena have produced mixed results. Meanwhile, the effects of economic growth on the occurrence or incidence of social unrest seem to have hardly been studied in recent years, as empirical analysis of contentious collective action has concentrated on political opportunity structures and dynamics of protest and repression. This paper helps fill that gap by rigorously re-examining the effects of short-term variations in economic growth on the occurrence of several forms of political instability in countries worldwide over the past few decades. In this paper, we do not seek to develop and test new theories of political instability. Instead, we aim to subject a hypothesis common to many prior theories of political instability to more careful empirical scrutiny. The goal is to provide a detailed empirical characterization of the relationship between economic growth and political instability in a broad sense. In effect, we describe the conventional wisdom as seen in the data. We do so with statistical models that use smoothing splines and multiple lags to allow for nonlinear and dynamic effects from economic growth on political stability. We also do so with an instrumented measure of growth that explicitly accounts for endogeneity in the relationship between political instability and economic growth. To our knowledge, ours is the first statistical study of this relationship to simultaneously address the possibility of nonlinearity and problems of endogeneity. As such, we believe this paper offers what is probably the most rigorous general evaluation of this argument to date. As the results show, some of our findings are surprising. Consistent with conventional assumptions, we find that social unrest and civil violence are more likely to occur and democratic regimes are more susceptible to coup attempts around periods of slow economic growth. At the same time, our analysis shows no significant relationship between variation in growth and the risk of civil-war onset, and results from our analysis of regime changes contradict the widely accepted claim that economic crises cause transitions from autocracy to democracy. While we would hardly pretend to have the last word on any of these relationships, our findings do suggest that the relationship between economic growth and political stability is neither as uniform nor as strong as the conventional wisdom(s) presume(s). We think these findings also help explain why the global recession of 2008–2010 has failed thus far to produce the wave of coups and regime failures that some observers had anticipated, in spite of the expected and apparent uptick in social unrest associated with the crisis.

Our evidence is assumptive of the worst case scenario – even that doesn’t lead to war.


Robert Jervis 11, Professor in the Department of Political Science and School of International and Public Affairs at Columbia University, December 2011, “Force in Our Times,” Survival, Vol. 25, No. 4, p. 403-425

Even if war is still seen as evil, the security community could be dissolved if severe conflicts of interest were to arise. Could the more peaceful world generate new interests that would bring the members of the community into sharp disputes? 45 A zero-sum sense of status would be one example, perhaps linked to a steep rise in nationalism. More likely would be a worsening of the current economic difficulties, which could itself produce greater nationalism, undermine democracy and bring back old-fashioned beggar-my-neighbor economic policies. While these dangers are real, it is hard to believe that the conflicts could be great enough to lead the members of the community to contemplate fighting each other. It is not so much that economic interdependence has proceeded to the point where it could not be reversed – states that were more internally interdependent than anything seen internationally have fought bloody civil wars. Rather it is that even if the more extreme versions of free trade and economic liberalism become discredited, it is hard to see how without building on a preexisting high level of political conflict leaders and mass opinion would come to believe that their countries could prosper by impoverishing or even attacking others. Is it possible that problems will not only become severe, but that people will entertain the thought that they have to be solved by war? While a pessimist could note that this argument does not appear as outlandish as it did before the financial crisis, an optimist could reply (correctly, in my view) that the very fact that we have seen such a sharp economic down-turn without anyone suggesting that force of arms is the solution shows that even if bad times bring about greater economic conflict, it will not make war thinkable.


Tech Sector High Now

Tech sector is doing great---as much business as before the dot com burst


Erginsoy, PwC’s Deals Practice director, 2015 (Tom, “US technology deal insights Analysis and trends in US technology 2015”, February, http://www.pwc.com/en_US/us/transaction-services/publications/assets/pwc-us-technology-deal-insights-2014.pdf)

Out with a bang! Simply put, 2014 was a banner year for the technology sector. Alongside broader economic growth in the US, technology set records not seen since the dot com era. Deals remained active throughout the year, peaking in the fourth quarter as many corporate and financial investors closed large, transformative deals. In the end, technology deal activity closed out 2014 36% higher, amidst IT spending growth of less than 2%. Equity markets and IPO pricings similarly soared to new highs, and deal makers have not signaled any intent to slow down. Domestically, continued recovery in the US has been strong and the US trade deficit declined to the lowest level in decades, even in light of a strengthening dollar. The housing market continued to improve, with new housing starts at the highest level since 2007. Consumer confidence increased further and interest rates remain near record lows, each contributing to that overall growth. While the Fed is expected to increase rates in September, the US was the only major economy to receive an increase in its 2015 GDP growth forecasts by the IMF’s most recent estimates. In labor markets, unemployment fell to a post-recession low of 5.6% and wage rates are anticipated to increase in the new year; however the labor participation rate hit a 30-year low of 62.7%, signaling an increase in long-term unemployment. On the political front, the US continues to make headlines. The nation’s debt ceiling issue remains unresolved, and with a newly elected GOP-run Congress, the battles over immigration reform and healthcare are escalating. Abroad, Europe was the focus of cross-border technology acquisitions; however, growth estimates in the Eurozone have continually been cut throughout the year, with the IMF now projecting 1.2% GDP growth in 2015. The outlook for the UK is generally favorable, though challenged by the uncertainty within the Eurozone, for which the saga of Greece’s membership in the EU continues. Russia, on the other hand, is anticipated to enter a recession more severe than that of 2008, as ongoing conflict in Ukraine, dropping oil prices, and a steep decline in the ruble lead the nation toward an economic crisis. In China, economic growth slowed to the weakest level since the Tiananmen Square sanctions of 1990, at 7.4%, and is projected to decline further below 7% in 2015, as the nation trends to a more “normal” pace of growth amid broader restructuring toward a consumption-based economy. The IMF now projects 4.3% 2015 GDP growth in developing countries, challenged by weak external demand; however, growth is expected to quickly follow recovery in the world’s developed nations. US equity markets continued to set record highs, with the Dow Jones, NASDAQ, and S&P 500 rising 7.5%, 13.4%, and 11.4%, respectively, during 2014. While there was some volatility that caused immediate pull-back by lenders for a few weeks in the fourth quarter, technology M&A and IPO pricings generally mirrored the activity and valuation of the broader markets. Leading technology companies continue to remain some of the most valuable in the world, with Apple, Google, and Microsoft each holding three of the top five spots by market cap. These and other technology high-flyers have helped to maintain impressive average EBITDA multiples, with the top 25 US technology companies touting approximately 11x in 2014. IPO activity in 2014 continued to increase to the next level, becoming the most active year since 2000. In total, there were 60 technology IPOs, an increase over the 51 posted in 2013, which was already the most active year since the last recession. Technology IPOs continued to remain a key driver in the market, representing roughly 40% of IPO value and 20% of IPO volume (20% of value excluding the $21.8 billion Alibaba IPO). Proceeds from new pricings neared $35 billion, and year-to-date performance returns approximated 22%, both factors that continue to reaffirm the long-term outlook for the industry as a whole. IT spending in 2014 posted a growth rate just under 2%, lower than prior estimates given exchange rate movements, while projections anticipate an increase to approximately 2.4% growth in 2015. Cloud offerings, mobile devices, and enterprise software have remained the focal points for IT investment over the past few years, and 2015 is expected to continue along a similar path. Enterprise software is anticipated to remain the area of highest growth potential, though challenged by increasing price pressure and competition as cloud and traditional providers battle for customers. Mobile devices are expected to remain a key growth area and focal point of IT to enable their organizations, while some expect that PCs may make a comeback. In an already active deal market throughout 2014, technology M&A certainly flexed its muscle to round out the year and raise expectations for what may come. As we consider the almost $350 billion in cash and securities on hand at the top 25 technology companies, record levels of private equity dry powder waiting to be deployed, and see indications of full pipelines from every angle of the market, 2015 promises to be another exciting year in technology M&A.

US tech will lead the world in 2015.


Bartels, Forrester Research analyst, 2015 (Andrew, “The Global Tech Market Outlook For 2015 To 2016”, 3-31, http://www.supplychain247.com/paper/the_global_tech_market_outlook_for_2015_to_2016)

As CIOs prepare and manage their 2015 tech budgets, they can confidently push for increases of 4% to 6% in their purchases of tech goods and services, depending on their country. Tech spending in the US, China, India, the UK, and the Nordics will be at the high end of this range; in the rest of Europe and Latin America, growth will be at the low end. Demand will be strongest for software - especially for analytics and cloud apps - and related services but weaker in hardware and outsourcing, creating savings opportunities. New project spending will be strong, much of it for technologies that support the business technology agenda for winning, serving, and retaining customers. Key Takeaways The Global Tech Market Will Grow By 5.3% In 2015 In Local Currencies, 5.9% In 2016 Improving economies in the US and elsewhere will help offset weakness in Japan, Europe, and oil-exporting countries, leading to moderate but improving global tech market growth. A strong US dollar in 2015 will hold dollar-denominated growth to 4.1%, with 6.3% for 2016 as the dollar weakens. The US Will Be The Major Driver Of Global Tech Market Growth The US tech market continues to be the locomotive that pulls the rest of the tech train. The US is not only the largest and most advanced tech market in terms of adopting new technology; it will also have the fifth-fastest growth of 6.3% in 2015. New Project Spending Will Grow, Driven By The Business Technology Agenda After two years in which uncertain economic outlooks have held back new project spending, this part of the tech budget will grow more rapidly than overall tech spending in 2015 and 2016. The key driver of faster project growth will be the business technology agenda for winning, serving, and retaining customers.

Confidence and optimism is high.


BDO Seidman 2015 (“2015 BDO Technology Outlook”, March, https://www.bdo.com/insights/industries/tech-life-sciences/2015-bdo-technology-outlook)

Tech CFOs Remain Upbeat About Industry’s Future Last year, the technology industry experienced a robust deal environment and a high volume of investments flowing into companies. According to the 2015 BDO Technology Outlook Survey of 100 chief financial officers at U.S. technology companies, this ongoing positive environment has caused CFOs to remain optimistic about the year ahead. While the outlook is robust, finance chiefs remain cognizant of the factors that could inhibit business growth for 2015, such as data security challenges, accounting changes and tax concerns. Finance Chiefs Confident About Revenue Growth On the heels of an exceptional year for the technology sector, a majority of CFOs (70 percent) anticipate increased sales revenue in 2015, up from 67 percent last year. Overall, finance chiefs project a revenue increase of more than 12 percent, following forecasts of an 11 percent increase in 2014 and an 8.7 percent increase in 2013, pointing to continued optimism in the industry. With Renaissance Capital reporting that tech IPO issuance rose 22 percent over last year to 55 deals—the highest level since 2007—CFOs are optimistic about IPO activity heading into 2015. A large majority of respondents (86 percent) say IPO activity will remain the same or increase in 2015. This sentiment is also reflected in the January 2015 BDO IPO Outlook Survey, with 73 percent of capital market executives at leading investment banks predicting an increase in technology offerings. What’s more, venture capital-backed investments soared in 2014. According to Dow Jones VentureSource, investment returns from VC funds are on the rise as 105 VC-backed companies went public in 2014—the highest number since 2000. Thirty-nine percent of CFOs expect VC-backed companies will give rise to the most tech IPOs this year, followed by private equity (36 percent) and owner/manager or privately held businesses (25 percent; up from 18 percent in 2014). Despite recent headlines around the uncertainty of another impending tech bubble, only five percent of CFOs believe the concerns about a tech bubble will have the greatest impact on the U.S. IPO market. Meanwhile, more than one-third believe the performance of recent tech IPOs will have the largest influence on the market, followed by U.S. market volatility (25 percent), global political and economic issues (23 percent) and appeal of IPOs in foreign markets (11 percent). Recent Cyberattacks Fuel Data Security Fears An annual report by the Ponemon Institute, which conducts independent research on privacy, data protection and information security policy, found that 43 percent of companies have experienced a data breach in the past year—up 10 percent from the year before. With the number of cyberattacks increasing, more tech executives are concerned about their own IT infrastructures and response plans. According to our survey, 67 percent have increased their spending on cybersecurity measures during the past year. Of those who have taken action, 90 percent implemented new software security tools, 72 percent created a formal response plan for security breaches, 48 percent turned to an external security consultant and 30 percent hired a chief security officer. While many cyberattacks come from domestic and foreign entities, online security challenges could also stem from geopolitical issues. In fact, 14 percent of CFOs believe global political issues will be the leading barrier to industry growth in 2015. Recent threats have even captured the attention of the White House with President Obama proposing a budget that would increase cybersecurity spending to $14 billion. Along the same lines, finance chiefs are also anxious about their intellectual property (IP) protection, with 47 percent saying foreign IP infringements has had the greatest impact on their IP security, followed by changes in patent law (24 percent) and patent trolls (20 percent). Last year saw a significant uptick in M&A transactions, and according to CB Insights, technology M&A deals and IPOs combined rose 58 percent in 2014. Following this momentum, nearly all CFOs (96 percent) believe M&A activity will increase or stay the same this year, on pace with last year’s forecast, and 66 percent expect that acquisitions will be primarily offensive. Close to two-thirds of CFOs (61 percent) believe the software sector, including cloud computing, will drive the most M&A activity in 2015, on trend with last year when 60 percent expressed a similar sentiment. In fact, International Data Group predicts that cloud computing initiatives will be the most important project for the majority of IT departments in 2015 and 42 percent of enterprises plan to increase their cloud computing spending this year. In addition, Forrester reports that Software-as-a-Service (SaaS) sales have been increasing at over 20 percent per year. As discussed in the Winter 2014 BDO TECH Software Newsletter, SaaS models are becoming more and more relevant as the business environment changes and the tech industry evolves. Traditionally, organizations purchased enterprise software, but on-premise solutions are becoming overpowered by SaaS, especially with the increasing use of mobile devices and related applications. “The software industry is quickly shifting from the traditional licensing model to cloud-based offerings, such as Software-as-a-Service, to meet the overwhelming need for real-time responses and easy integration,” said Hank Galligan, leader of the Software Practice at BDO. “As the business environment evolves, companies are acknowledging the pressure to upgrade or introduce cloud computing services either through acquisitions or on their own.” When looking at key drivers of acquisitions in today’s tech market, one-third of CFOs believe increased revenue and profitability will be the primary impetus for M&A activity in 2015, followed by improved market share (25 percent), gaining engineering and research capabilities (14 percent) and enhancing technology assets and intellectual property (13 percent), which dropped from 28 percent in 2014. “Although the tech industry is cautious of overvaluation, finance chiefs are confident that deal activity will continue its momentum well into 2015. As consumers continue to demand innovative products and investments keep pouring into the sector, technology companies may be better positioned for business growth through strategic partnerships to expand their capabilities and offerings as well as to compete effectively and gain market share.” said Aftab Jamil, partner and leader of the Technology and Life Sciences Practice at BDO USA, LLP. Surprisingly, CFOs are unfazed by overvaluation concerns in the industry, with 62 percent predicting that business valuations will increase this year, a 35 percent jump from 2014.


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