November 2022 / 5 Min Read

Driving the Deal: The Digital Evolution and the Role of the Technology, Media and Telecommunications Sector

Multiple industries are increasingly reliant on technology, driving M&A activity across the technology, media and telecommunications sector as a catalyst for change.

Key Takeaways

The digital revolution is driving a rapid uptick in M&A deal activity across the TMT sector, bringing both risks and opportunities to organizations.
The appetite from private equity investors is growing at a rapid pace as organizations seek to remain competitive and enhance their core capabilities.
Top emerging trends include cryptocurrency, disruptive technologies and artificial intelligence.

2021 and H1/2022 saw an accelerated rate of merger and acquisition (M&A) activity in the technology, media and telecommunications (TMT) sector. TMT continues to be an out-performer and this isn’t expected to change any time soon. A look at Mergermarket’s published “company for sale” stories show the sector is way out in front in terms of potential deals in the making¹.

The TMT sector was the most active globally in 2021 - in both deal value and volume terms.

Source: White & Case 2022

In Aon’s recent Risk in Review survey, almost three-quarters of respondents (70%), by far the largest share, cite technology, media & telecoms (TMT) as the most prolific sector in terms of expected dealmaking over the next 12 months.

M&A is Driving Growth

The digital revolution continues to gather momentum. Multiple industries are becoming increasingly reliant on technology, driving an uptick in M&A activity across the TMT sector. The appetite from private equity investors is growing at a rapid pace as organizations seek to remain competitive and find new ways to enhance their core capabilities - while seizing opportunities for growth. Meanwhile, global M&A activity remains very significant, with investments triggered by initial public offerings (IPOs) and venture capital (VC) funding.

The current deal appetite reflects the growth potential in an increasingly virtual world. Next-generation innovations have prompted a surge of opportunities, supported by an increase in new investments across the entire digital infrastructure.

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M&A Trends: An Industry Focus

Technology

As industries continue to recover from the disruption caused by the COVID-19 pandemic, the shift in consumer behavior continues to drive many organizations to reassess their operations. Consumers increasingly rely on online services, and this changing behavior has boosted deal activity, particularly for digital platforms such as online marketplaces and consumer comparison tools.

Technology implementation is also accelerating across retail and consumer-focused industries, where digital engagement is crucial throughout the supply chain as well as at “point of sale”. Meanwhile, the fintech-led shake-up of financial services and “medtech” in healthcare is also gathering momentum.

Buyers are looking to accelerate acquisitions around artificial intelligence (AI), cloud transition (applications, connectivity and security) and the internet of things (IoT).

Looking ahead, technology will continue to act as an enabler for growth for many sectors. Technologies such as quantum computing, space exploration and energy storage are moving towards commercialization and are seeing more VC investment, IPO and M&A activity. In pursuing M&A activity, businesses should prepare for increased sovereignty and government scrutiny on data, privacy and cryptocurrency laws in cross-border deals.

Media

Advertising revenues were down during the pandemic’s peak, with shows canceled and many cinemas closed during lockdowns. More traditional deal activity has been strong in some growth markets, including gaming and streaming. Access to public markets and private capital are needed to facilitate balance sheet repair and support growth, driving an uptick in deal activity more recently.

Telecommunications

M&A is playing a key role in strengthening capacity and future-proofing capabilities within telecoms, in areas such as fiber rollout, 5G and SD-WAN-enabled infrastructure. Consolidation of network providers is already following, with fast buildouts of fibre infrastructure by independent players, and bringing one or more of these providers together would offer greater economies of scale.

An Outlook: Top Emerging M&A Trends

1 Crytocurrency

2Disruptive technologies

3 Artificial intelligence

As a major conduit for change, the TMT sector will enable multiple industries to revolutionize their operations and accelerate innovation.

Download our whitepaper on Mergers and Acquisitions in the TMT sector to get more insights into future trends and key considerations.

Download the whitepaper

¹ Datasite & Mergermarket, 2022

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