• Tech M&A trends; Momentum from 2021 to continue in 2022
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Tech M&A trends; Momentum from 2021 to continue in 2022

02 February 2022

Global technology M&A values exceeded $1trillion for the first time in 2021, representing a 60% increase on 2020. The high levels of activity in the second half of 2020 continued through 2021 to generate the record-breaking year we have just had. Overall deal volumes in 2021 exceeded the pre pandemic level with a 21% increase on 2019 and an 8% increase on 2018. 

The winners in Tech M&A in 2021

The same investment themes that drove activity in the second half of 2020 have persisted as businesses have adapted to new ways of working. Companies across all sectors have had to invest in their digital transformation to support hybrid, remote and agile working. This had led to increased demand for the services of technology providers and increased M&A activity.

Software accounted for almost a half of the worldwide technology sector deals. We have seen an increase in the UK market of fast-growing niche B2B software providers disrupting old legacy tech or bringing tech applications to new sectors such as mobility and healthcare.

There has been a corresponding increase in demand for underlying infrastructure. Here, we have seen a number of deals in fibre, connectivity, data centres and M2M funded by corporates, PE and infrastructure funds. Cyber security clearly remains a very active space given the increasing number of attacks. Companies that provide the underlying software or services continue to grow quickly and fuel M&A activity. Finally, the sheer demand for digital transformation and the fixed UK supply base has seen an expansion in nearshore capability, improved performance of those companies and increased M&A activity.

Change in the Tech M&A buyer mix

2021 saw the re-emergence of corporate buyers after years private equity dominating the market. Several larger assets that might have previously fallen to PE have been acquired by trade such as Telefonica’s acquisition of Cancom UK and Advinia’s acquisition of Content + Cloud.

We believe there are two main reasons for this. Firstly, the PE backed buy and builds in certain subsectors are attaining a scale where they will take market share so it’s a great way for large corporates to grow and take out a growing threat. Increased share prices and availability of finance mean that corporates now have the firepower to be able to compete with PE. This is evidenced by the increase in the PCPI to 11.4x in Q4 from 10.6x in Q3, while the PEPI dropped to 12.0x in Q4 from 12.4x in Q3.

Tech M&A outlook for 2022

The fundamentals in Tech M&A remain very strong so we see these positive trends continuing through 2022. The continuing ready access of affordable financing and the growing appetite for technology across the economy and society will drive performance and M&A activity. The only constraints are supply side such as the shortage of ‘digital’ talent and the microchip shortage which is affecting a number of technology sub sectors. 

Even more reasons to work with us on your next Tech M&A deal

We’re delighted to announce that we now offer commercial due diligence and strategy consulting exclusively focused on the TMT sector. Our clients will benefit from the expertise and experience of our expanded team led by Jonathan Rowan. Jonathan has recently joined BDO as a Partner bringing well over 20 years’ experience of advising the global TMT sector on both corporate strategy and CDD topics. Jonathan has worked on deals in the mid-market as well as large corporate transactions.

For more information, please do get in touch with Paul Russell or Jonathan Rowan.

READ OUR PCPI REPORT