Technology, Media and Telecommunications companies find themselves in a period of rapid
change, as digital and new technologies shift borders and transform whole industries.
New analysis shows technology firms are increasingly interested in acquiring
companies, in a bid to grow, access innovation, and expand into new segments.
While merger and acquisition activity has been in a state of flux in recent
months, technology investment remains one of the world’s fastest growing
sectors, driven by innovation and disruption. The industry, has, in recent
years, sought to leverage strategic mergers and acquisitions to acquire access
to broader tools, as well as users’ data, among others. Facebook’s acquisition
of WhatsApp for instance, or Apple’s acquisition of Shazam are examples of such
strategic moves.
The
industry remains well endowed with cash, while growing disruption in the
Fintech space means that tech companies continue to eye ways of competing
across traditional borders – with acquisitions of start-ups being a popular
investment route. In terms of confidence the rapid growth of tech industry,
market capitalisation is reflected across key indicators. Respondents’ level of
confidence at their sector level for corporate earnings hit 71% in the latest
survey, a massive 70 percentage point increase from the same period last year.
Credit availability increased significantly too, while short term market
stability was cited by 68% of respondents as improving. The industry is well
positioned in terms of equity valuations / stock market outlook, cited by 46%
as improving and 51% as stable.The current strong position of tech industry
respondents places them in a comfortable position to consolidate, expand and
access key technologies and talent – through M&A. The number of respondents
that expect to pursue M&A over the coming 12 months stood at 57% in the
tech industry, a seven-percentage point increase on the previous year and well
above the 33% recorded in October 2013.
The
tech industry has also increased its acquisition appetite to that of the wider
global industry, after considerable divergence between October 2015 and April
2017. The firm notes, however, that while intentions were relatively subdued
for the 2015-16 period, actual deal activity was – like much of the wider
industry – booming. This year will likely see deal volume decrease by 9% and
deal value by 34%.The key drivers cited by the tech firms surveyed reflect
wider trends in the strategic M&A space. The top cited reasons include
acquiring innovation (24%) and growing market share (also 24%). Access to new
geographies and additional talent follow, at 18% and 16% of respondents respectively.
Reactions to changes in customer behaviour and securing supply follow, at 14%
and 4% respectively. Commenting on the sector’s M&A appetite, the authors
stated, “The question of how much of today’s tech sector optimism translates
into tomorrow’s done deals will be answered in 2018. Tech companies can work to
realise their deal making intentions by taking deliberate steps indicated in
these pages: re-evaluate their portfolio review process, take advantage of
modern analytical tools, prepare for an increasingly competitive M&A market
and pre-plan for integration.”
Alcor M&A is a leading advisory firm providing financial services
with an emphasis on customized solutions in the areas of M&A
advisory, Joint
Venture Advisory, Financial Advisory, Private
Equity, Debt Financing and International Business Development. These services leverages insights,
relationships and a culture that emphasizes a strong orientation towards excellence.
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