Need to acquire technology underpins corporate TMT dealmaking - PwC analysis

New analysis by PwC looking at recent merger and acquisition activity in TMT shows that technology is front and centre of companies’ minds when looking at deal activity and value.

The report, Creating Value Beyond the Deal in TMT, is part of an extensive review of corporate M&A globally, highlighting perspectives of both the buyer and seller in a transaction, assessing public market data and primary sources from 600 interview participants.  Among the key findings, 40% of TMT companies said technology acquisition was the main strategic driver behind their latest deal, the highest figure compared to other sectors surveyed including financial services, retail, healthcare and energy. A quarter of TMT companies say disruption of the industry has driven their latest acquisition, the second highest amongst the other sectors surveyed and only behind financial services.

TMT senior executives were also asked about the assets they have sold over the past three years and company owners revealed that almost a third (30%) disposed of assets that were struggling to remain competitive, another high across all sectors. Twenty per cent said that ongoing geopolitical and macroeconomic issues caused them to sell assets.

Nick George, partner in PwC’s TMT practice, said: 

“The TMT sector has been through a fast-paced transformation over the past decade which has put massive pressure on deal-makers, from origination to execution and integration. Disruption and competition are the main drivers of acquisitions and this means businesses in the sector need to be prepared to take advantage of opportunistic deals. Making such decisions at speed is tough, but with competition for the best assets in TMT so intense, businesses need to do the groundwork that allows them to acquire at speed. 

“On divestments, the focus has been largely on re-shaping, particularly on the B2B side where for instance subsidiary businesses rooted in on-premise or capital equipment sales have been shed, to focus on driving growth in the cloud.”

Adding value to deals

As part of the study, PwC asked companies how they will look to increase value in their future acquisitions and divestments. In TMT, more than a quarter (28%) said both more effective programme management and starting integration earlier were their biggest lessons to take away for future acquisitions.

For divestments the top three areas cited by respondents where value could be added were - improved divestment resources (41%), which came highest for TMT companies and third overall in comparison to industrial products and healthcare. The second highest lesson learnt was more effective programme management (39%) and thirdly better communication with stakeholders (37%). 

Nick George, added:

“Companies in the sector acknowledge they need to do a better job of managing their deal programmes and start planning future deals earlier. Having a plan in place well before a deal begins is vital given the speed of timescales we are seeing in the market. Our research also highlights the importance of culture as a driver of deal success- typically one of the top three factors. This is particularly true with TMT businesses where preserving the culture of the acquired companies was rated critical.

“Almost a third of respondents sold a business they thought was struggling to compete. In a fast-moving TMT marketplace where additional capabilities can secure advantage very quickly, it will often make sense to cut losses earlier. Divestments demand efficient management of the process and planning needs to start earlier than many expect and our research shows this message is getting to senior executives.”

ENDS

Notes to editors

The full report is available on request, please call Felix Ampofo on 07841 468 245 or felix.ampofo@pwc.com

PwC surveyed over 100 senior-level technology, media and telecommunications sector executives about their experiences creating value through M&A. A total of 600 executives were surveyed across all sectors

PwC is sponsoring the TMT Finance Tech M&A Forum taking place on May 22nd. For more info visit https://www.tmtfinance.com/merger/tech/

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