The Technology M&A Review
By Anu Balasubramanian, Sarah Pearce, Jamie Holdoway, & Ashley Webber
A review of UK M&A transactions in the technology sector across 2019 elicits a paradox in the market: uncertainty around Brexit, increased regulatory scrutiny and indications that the government may (in keeping with global protectionist tendencies) follow more interventionist policies, have not as yet tempered appetite for dealmaking among private investors. A key driver for this trend is the often-cited deep pools of capital raised by asset managers focused on private markets, although a meaningful volume of strategic M&A shows that this is by no means the only force in play. Perhaps more significant is the capital raising by funds exclusively focused on the technology sector, the successful performance of assets in the sector relative to other sectors and the increased market perception that the technology sector provides some countercyclical ballast to downward trending market dynamics.
Despite widespread expectations of a downturn in the near term, the above trends have bolstered (or at least prolonged) the long run of the sellers’ market. This was exacerbated following the first two quarters of 2020 as the impact of the coivd-19 pandemic saw many sellers retreat from the market, resulting in a scarcity of desirable assets. Targets with resilient or countercyclical business models have become more prized than ever, and deep-pocketed investors are having to compete harder to acquire them.