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Tech M&A boom set to peak next year

Money on a laptop
(Image credit: Pixabay)

Next year could be record-breaking in terms of mergers and acquisitions (M&A) among technology companies, a new report from Gartner is forecasting.

The firm's report says the acquisition of technology providers slowed down last year due to the Covid-19 pandemic, but the trend rebounded this year, as the vaccines started rolling out and the economy took a breather.

“Market conditions for deal-making will continue to improve as volatility stemming from Covid-19 subsides,” said Max Azaham, senior research director at Gartner. “Tech CEOs pursuing acquisitions should anticipate increased competition for targets and take steps to gain advantages over other acquirers to earn seller acceptance.”

If the trend of rising M&As continues throughout this year and the next, 2022 might surpass the highs set in 2018, Gartner predicts.

Technology CEOs will also start considering partnerships and ecosystems, in order to “level the playing field” against larger companies” resulting from consolidation in various markets, Azaham further said.

Communications, software and service providers

Communications providers were the most sought-after organizations, followed by services and software firms. Private equity firms and other financial services companies are increasingly eyeing technology providers, Gartner added.

Last year, acquisitions of software providers made up more than half of all purchases. Despite the (already major) interest, Gartner believes financial acquirers’ increasing interest “should drive higher activity” all throughout the year.

The report also says the movement in the market could, but should not, negatively affect the user experience. Successful acquirers will keep the implications for end-users in mind, and make sure the customer experience remains top priority all throughout the M&A, Gartner said.

Service disruptions should be kept at a minimum, while transparent communication on product, pricing and support changes, remains pivotal.

“Without empathy and a deep understanding of what motivates the existing customer base, organizations risk acquiring a customer base that will churn following deal closure,” said Mr. Azaham.