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Technology deals dominate the 2021 global M&A market

Allen & Overy’s latest M&A Insights report* shows that that the value of global M&A transactions surged to a record high of nearly USD5.8 trillion in 2021, an increase of 64% on 2020, and 48% higher than 2018, the previous highest year on record.

David Broadley, A&O’s global co-head of Corporate/M&A, commented: “The real powerhouse behind this incredibly resilient market was the technology sector, which saw a 71% increase in deal values year-on-year, exceeding the US1tn mark for the first time. Deals within the sector accounted for 20% of all global M&A deals by value and 22% by volume.”

The report analyses the record-breaking year for technology M&A, looking at what is driving investors to the market and the challenges they face in closing deals. The report also considers the requirements for AI due diligence and talent retention in technology acquisitions, the global trend for growing government intervention on sensitive transactions, and what technology investors are doing to retain and incentivise key personnel in their acquisitions.

David Broadley continued: “In an extraordinary year, we have seen transactions at every level of the technology market, from small start-ups being bought for their IP and innovative products through to megadeals, as well-funded, high-growth companies look to expand into new markets, buy into new technologies or look to hire new talent. Evidently, these companies, whose products and services have long been distributed worldwide, are now global in their footprint too. It’s also an indication of a growing confidence that we are experiencing a sustained trend, fuelled by global demand for innovation and digital transformation.”

Digital infrastructure transactions continue to increase globally, with investors particularly focused on mobile towers, data centres and fibre networks. Telecom companies, pressed to release capital to invest in their customer offerings and new technologies like Fibre-to-the-Home and 5G mobile, continue to divest infrastructure, particularly towers, fibre networks and data centres, with dedicated digital infrastructure investors moving in to operate them.

Tom Levine, A&O’s global co-head of Telecoms, Media and Technology, said: “The volume of deals suggests this trend has some way to run, particularly with investors in towers and fibre networks prepared to pay attractive multiples to achieve scale. The very significant differences between the valuations of the telecom companies and the valuations for their carved-out digital infrastructure makes it difficult to resist the trend.”

Meanwhile, technology and life sciences companies overwhelmingly dominated fundraising markets in 2021, beating all previous records for amounts raised. Data from Crunchbase suggests that the previous USD100 billion quarterly record for technology fundraising was consistently superseded during 2021.These figures reflect the hunger for cash among high-growth technology companies as they look to fund R&D programmes, acquire talent, assets and customers, invest in new technologies, and move into new markets.

Commenting, A&O Corporate M&A partner Will Samengo-Turner said: “The busy fundraising market demonstrates a continued trend over recent years and, as the pandemic has underlined the economic and social importance of these companies, they are finding a host of investors eager to buy into their growth story. As a result, funding rounds are growing in size and becoming more frequent in order to satisfy these cash-hungry business models and take advantage of eye-catching valuations – in fact, in some cases fundraisings are happening with such regularity that companies do not even announce them to the market.”

Also included in the report is a close look at why software deals are proving irresistible to a diverse range of investors, including existing technology companies, private equity and non-tech companies.

*Figures represent deals announced between 1 January and 31 December 2021. Data provided by Refinitiv.

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