Complex cross-border challenges change nature of technology transactions

Technology has been one of the main drivers of M&A for more than a decade. Through the early years of the 21st century tech companies snapped up other innovative businesses to fuel their expansion into telecoms, navigation, streaming and healthcare.

But as their influence has grown, governments and regulators around the world have looked to limit their power, using antitrust and consumer protection laws to intervene in megadeals and investigate bids for smaller companies that they suspect may be stifling competition.

Many countries have in recent years also implemented tighter national security controls to restrict foreign investments in sensitive technologies such as AI which, have dual commercial and military applications.

More recently the tech sector has been buffeted by high-profile failures and the collapse of specialist lenders. At the same time, macro headwinds have reduced startup valuations, while rising interest rates have driven institutional capital into safer asset classes, stemmed the flow of syndicated loans for leveraged buyouts, and contributed to an overall slowdown in venture capital investing.

What are the keys to negotiating a successful collaboration deal?

Collaborations can be heavily negotiated so a focused, rigorous process helps. Parties should consider working in sprints and meeting in person – but only if the numbers are manageable.

Any internal due diligence should be conducted before negotiations start, and during talks, parties should consider separate discussions on the IP agreement and overall collaboration contract while keeping core teams on both sides.

Collaboration deals can be complex and a perfect outcome may not be possible, so it’s important to stay focused on finding pragmatic solutions. At the same time parties must accept a degree of uncertainty – there will inevitably be grey areas, but also structures that limit potential liabilities.

Finally, cultivating a collaboration requires a different mindset to a pure M&A deal – JVs and partnerships are long-term arrangements, so maintaining a productive relationship is critical.

How issues such as climate change are driving cross-sector collaboration deals

These factors – coupled with the sheer scale and complexity of challenges such as climate change – are combining to change the shape of technology deal-making.

In the past, industries such as energy, mining, shipping and manufacturing typically focused on organic innovation, but the emergence of transformational technologies such as robotics, data analytics – and more recently AI and quantum computing – necessitated a shift in focus.

For years, tech acquisitions were traditional companies’ preferred approach, but today many are pursuing strategies more akin to VC investing, placing multiple bets via minority stakes in areas where the path to success is unclear, such as cutting-edge energy solutions.

Perhaps the more significant trend however is the rise of cross-sector, cross-border collaboration deals through which businesses pool expertise to develop systems that have applications in a range of settings.