Doing the right deals in technology, media and telecommunications

Globally, M&A in technology, media and telecommunications (TMT) looks set to sustain the high levels of activity seen in 2021, driven by new market opportunities, tech convergence, and an abundance of capital.

“TMT businesses in the UK may not have the scale of some of their Big Tech US counterparts. But the deal appetite is just as strong as digital transformation gathers pace across the economy and some of the brakes on consolidation begin to ease.”

Technology

Having outperformed other sectors during the pandemic, technology will remain at the forefront of growth.

Deal drivers include the blurring of boundaries with other industries and the embedding of digital technology into almost every aspect of life. Resulting deal targets include the technology that allows companies to move from one-off sale to recurring subscription income in areas such as health sensors and equipment maintenance. The move to the cloud is also enabling businesses in sectors like financial services to shift to software as a service and platform options and apply standardised solutions in areas such as customer relationship management.

The competition for targets and availability of capital, much of it from private equity, are enabling entrepreneurs to cash in their start-up stakes and move their businesses to the next stage of growth.

Media

Having primarily focused on the at home entertainment market, media is broadening out again as people go back to shows, concerts and cinemas. The resulting deal drivers include a rebalancing of portfolios that had been heavily weighted toward home use.

Other potential drivers for dealmaking include the shake-up in digital advertising, though the full effects and their implications are still unclear.

Telecoms

Telecoms is opening up for consolidation. While not giving a green light, Ofcom’s future approach to mobile markets discussion paper moves the bar by agreeing to look at potential takeovers on their merits rather than seeing any reduction in major providers as a threat to competition. Further targets include small local fibre providers as rollout nears completion.

Other deal drivers include the move to unified communications as a service (UCAAS) models. The result is growing collaboration and a potential increase in mergers between technology and communications businesses.

Impact of ESG

The potential buyers for digital infrastructure include infrastructure funds that are looking to move away from fossil fuel related investments to meet investor expectations on environmental, social and governance (ESG) goals.

Further ESG-related openings within TMT include energy storage The tech sector is well positioned to play a lead role in stationary energy storage such as developing alternatives to lithium-ion battery solutions.

Maximising deal value

How can your business maximise deal value in this fast-evolving sector? Based on the emerging trends, three priorities stand out:

1. Targeting premium capabilities
2. Technification of things offers transformational opportunities
3. Boost the top line

1. Targeting premium capabilities

The clear finding from our recent Doing the Right Deals research is that deals that boost capabilities offer the greatest value creation potential. Within TMT, the capability focus includes talent. And this isn’t just tech innovators, as important as they are, but also high quality management teams who can commercialise and operationalise developments within their business.

2. Technification of things offers transformational opportunities

In an increasingly digital first world, the value creation opportunities include identifying and driving the next frontiers of technification and harnessing the capabilities needed to make this possible. Among the resulting M&A opportunities will be developments in adjacent industries such as the application of new sensor and energy storage technology within automotive.

3. Boost the top line

A lot of the growth in TMT is top line driven. Acquiring market share is clearly part of this. But sales efficiency and productivity are set to be just as critical, highlighting the importance of cross-selling, upselling and the upskilling needed to facilitate this.

Find out more

We explore the key deal drivers and how to realise the potential further in our Global M&A Trends in Technology, Media & Telecommunications: 2022 Outlook. You can also check out our Doing the Right Deals report for more insights into how to capitalise on capabilities-driven deal opportunities.