Law firm Baker McKenzie – working with Oxford Economics – says that global mergers and acquisitions (M&As) in the telecoms and technology sector will rise from last years $295 billion to $648 billion this year.
At the same time initial public offerings (IPOs) of shares will rise from $21.6 billion last year to $45.5 billion this year. Both figures will then tail off slightly over the next few years, but 2020 will still see more activity in both M&As and IPOs than 2017.
Europe will see a doubling in M&A growth this year in the sector, and two regions – Latin America and Africa and the Middle East – will see a quadrupling in growth, though from a smaller base.
Matthew Gemello, an M&A partner at Baker McKenzie based in Palo Alto, said that innovation in artificial intelligence, cloud computing, cyber security and big data is driving deal activity. Many businesses that are focused on the use of customer data will buy competitors and technologies to attract more customer engagement, he said.
The firm also expects more cross-sector deals. Anne-Marie Allgrove, global chair of Baker McKenzie’s global TMT industry group, based in Sydney, said: “Hybrid sectors represent the growing convergence of traditional industries and technology as companies battle to remain competitive. When you couple the rapid pace of innovation and continued push for vertical integration, it creates a recipe for increased M&A activity.”
The law firm said it expected “a notable rise in the coming year amid easing policy concerns in the US and EU, reasonable GDP growth across regions, and accommodative fiscal policy”.
It added: “Several trends of embedding new technology across sectors, plus activist investment in technology firms by emerging markets such as China and Saudi Arabia, suggest strong deal activity in 2018. In fact, the technology and telecommunications industry is expected to drive the global rebound in IPO activity in 2018, aided by the Chinese government’s efforts to spur technology firms to go public.”
London-based Baker McKenzie partner Charles Whitefoord said: “Many companies are sitting on significant cash piles. Technology companies are coming under pressure to either deploy that money or return it to shareholders.”
Tom Rice, a capital markets partner at Baker McKenzie based in New York, suggested that older private-equity funds with “ageing tech investments that need to be sold or spun off” would help to stimulate M&As and IPOs.
Paul Rawlinson, Baker McKenzie’s global chair, added: “As long as the brakes are not put any further on global free trade, we expect an uplift in both M&A and IPO activity as dealmakers and investors gain greater confidence in the business prospects of acquisition targets and newly-listed businesses.”
