Merger and acquisition (M&A) activity in the global TMT sector declined sharply in 2023, worsening from the previous year.
Total global TMT M&A deals decreased by 46% to $403 billion in 2023, compared to $745 billion a year ago. A similar trend was observed in transaction volume, with a total of 451 transactions in 2023, a 26% decrease from 2022.
High interest rates and low growth in all major economies are hampering activity by increasing borrowing costs and reducing risk appetite. Geopolitical tensions and regulatory scrutiny are also contributing to the slowdown in M&A in the technology sector.
Big Tech’s battle for seamless acquisitions
Big Tech’s ambitions to use M&A deals to strengthen its position and expand into other markets are being hampered by regulators’ antitrust activity. Among Big Tech companies, Microsoft has been one of the most acquisitive from his 2019 to his 2023 period, with him investing more than $100 billion in themes such as cloud, gaming, AI, and cybersecurity. doing. Despite intense regulatory scrutiny, the company managed to complete its $69 billion acquisition of Activision Blizzard in October 2023. However, regulators in the UK, EU and US are currently investigating the $13 billion investment in OpenAI, which runs ChatGPT.
Increased antitrust scrutiny of megadeals (deals valued at $1 billion or more) led to an even steeper 65% decline in TMT industry volume from 2021 to 2023. Regulators around the world are keeping a close eye on big acquisitions. Potential acquirers need to proactively address concerns from regulators and be prepared to make concessions.
ADOBE has canceled its planned $20 billion acquisition of Figma in late 2023 after opposition from UK and EU regulators. In January 2024, Amazon’s $1.7 billion acquisition plan for iRobot fell through due to EU scrutiny.
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AI remains a key focus for Big Tech
Big Tech is attracting the attention of regulators, who are considering major investments and acquisitions in the key theme of AI. Big Tech companies are pouring money into generative AI companies like OpenAI, Anthropic, and Cohere.
Technology companies planning to pump large sums of money into AI startups should closely monitor ongoing regulatory reviews, as there is a growing risk that these types of investments will be prohibited or restricted by regulators. .
The US still dominates the TMT market, but the gap is smaller than in 2023
US companies continued to lead TMT’s M&A deal activity in 2023, with 146 deals accounting for 51% of deal value in 2023, worth $204 billion. As in the United States, antitrust regulators are considering lowering the standards for what constitutes a company with significant market power. The UK, India and China are also considering imposing stricter obligations on major digital platforms’ M&A plans.
TMT market outlook
The global TMT sector witnessed a notable change in M&A dynamics in 2023, with a significant decline in both deal value and deal volume. Companies need to proactively address regulatory concerns and prepare for potential concessions to secure deal approval in an increasingly scrutinized environment. Despite these challenges, AI will continue to be a focus area for Big Tech investments.