Technology M&A deals at all-time high – report

THIS past year has been extremely exciting for the technology industry. Whether you think of humanoid robots, autonomous vehicles, courier-drones, the technology landscape for business is changing rapidly.

Startups and small businesses such as Taiger and Visenze created exciting solutions using emerging technologies such as artificial intelligence and machine learning, while industry giants like Airbus and Amazon made excellent progress with urban projects that could transform cities overnight.

Turns out, it was not just a year of creating exciting projects but also of acquiring innovative technological capabilities. A new Mergermarket report found that global dealmaking activity in the technology, media, and telecommunications (TMT) space last year reached an all-time high.

Although total deal value fell 26.3 percent to US$498.2 billion, the 3,389 deals cracked in 2017 indicate more deals of smaller transaction value.

The report found that half of all deals in the TMT space was in the computer software sub-sector, which accounted for 1,739 transactions worth US$128.8 billion. Software was followed by M&A deals in e-commerce, which totaled to just 629 transactions.

However, it is also worth noting that although deal count in software rose as compared to the previous year, no software deals in 2017 reached anywhere close to mega-deal status, achieved when a transaction is worth more than US$10 billion.

According to the findings of the report, private equity activity within the software space also set a new record in terms of the number of deals that took place.

While disclosed deal values for software buyouts ended with an aggregate US$ 38.8bn, a 16.4 percent decrease from 2016, though 2017 was still the third-highest value on record, deal count hit a peak of 438 transactions, 123 more than in 2016, which had previously held the record.

In 2018, despite political and regulatory uncertainty, Mergermarket expects deals counts in the technology sector to rise even if deal values shrink.

The report suggests that TMT players will continue to show strong interest in M&A deals with cybersecurity, data management, and financial technology companies.

“There is mounting evidence that buyers are looking into the Internet of Things and data space, and the emergence of new EU regulations concerning data privacy will accentuate dealflow on the cybersecurity side,” said Peter Watts, Partner, Hogan Lovells.

Other forthcoming areas of focus, particularly for PE investors, are SaaS platform companies.

“With the ever-increasing digitization of business sectors, Saas offerings continue to grow from both new entrants into the field, as well as old-line hardware companies moving into SaaS via cloud computing,” adds Helen Croke, a private equity partner in the London office at Ropes & Gray.

The report emphasized that cybersecurity and artificial intelligence platforms that can used in industrial work will be particular interest going forward.

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