The number of mergers and acquisitions across the technology, media & telecom (TMT) sector reached an all-time high in 2017, though the total deal value declined from 2016, according to a recent Mergermarket study.
There were 3,389 deals in the TMT sector in 2017 worth a combined US$498.2 billion. That value was down 26.3 percent from $676.3 billion in 2016, the researcher says.
The influence of technology in nearly every industry is forcing M&A consolidation, the researcher says. As companies struggle to incorporate these digital tools into their business, it’s often easier to merge with another entity, the study suggests. This has been particularly true in the consumer, pharma, media, and medical and biotech industries.
The computer software sub-sector saw the most M&A activity within the TMT-focused study. The 1,739 transactions, worth $128.8 billion, was nearly three times that of eCommerce, which saw the second-highest deal count. By deal value, software pulled in 25.7% of the M&A deal dollars.
Private equity players made big moves within the software space as well, setting a new record in terms of deal count. The largest of these was UK-based PE firm HgCapital’s $ 5.4 billion buyout of Norway-based business software and services company Visma.
The Amazon & AWS Effects
The study’s authors go on to suggest that the technology sector -- led by Amazon -- continues to disrupt other sectors.
As the authors note:
“Though not – yet – entering the humanoid robot market, Amazon stayed busy throughout the year, disrupting markets left and right – even literal ones. In what at the time was a somewhat surprising move, the company entered the consumer retail space with a bang, snatching up health food supermarket chain Whole Foods in June for $13.5 billion, its largest acquisition ever as well as the largest grocery deal in a decade, while also expanding and/or opening several brick-and-mortar shops including Amazon Books and Amazon Go.”
Amazon’s bold strides have been leading to some unlikely alliances, according to Mergermarket intelligence. Industry giants like Walmart and Google have teamed up to try and cut off Amazon at the pass.
Amazon’s presence was also felt in the healthcare space where CVS Health, in a defensive move according to Mergermarket, acquired insurance carrier Aetna for $67.8 billion. That move purportedly coming after Amazon filed licenses to operate pharmacy benefit management operations in multiple states.
M&A Continues Strong
M&A activity doesn’t look ready to ease up anytime soon either, according to the study’s authors. “The structural changes taking place across industries as well as society brought on by Technology’s advances are likely to continue shaping the landscape for dealmaking into 2018,” they write. “While deal values may continue to fall, deal count in sectors such as Technology are set to rise further. The sector will only add more pressure to other long-standing sectors to consolidate and battle over high-value targets, despite political and regulatory uncertainty.”
The recent tax cuts in the United States is further expected to spur M&A deals. But interest rate hikes projected for 2018 could further decrease values. Still, the momentum surrounding TMT’s deal count is likely to continue, Mergermarket writes, “as it continues on the inevitable path of continued growth.”
Within the IT services sector, ChannelE2E expects M&A activity to remain strong as well.