The global tech market will see almost $3 trillion of M&A activity over the next five years as consolidation and innovation fuel deal-making. The growth of various regional and city-based financing hubs, such as the dynamic London corporate finance scene, and the growing reach of business transfer agents will help drive greater dealmaking.
A forecast by Baker & McKenzie predicts more than $2.6 trillion of deals to be completed within the sector from 2015 through 2020. With steady growth from a projected $324 billion in deals in 2015, transaction activity is expected to peak in 2018 at $492 billion, as companies continue to see M&A as a way of gaining market share in a disruptive sector.
Tech businesses have become increasingly active players in global M&A as intense capital requirements make acquisitions a strategically compelling way of achieving economies of scale. The dynamic nature of the competition we are seeing in the sector provide further incentive to quickly scale.
Innovations in mobile payments system, data analytics, cyber security and cloud computing create the need for new intellectual property and talent that many companies can access quickest and easiest through acquisitions. In addition, business models continue to converge helping to further boost M&A activity, such as with telecoms businesses seeking vertical integration with media and technology.
Markets that are predicted to grow the fastest in terms of overall M&A in the next five years are China, the Netherlands, Mexico, India, UK, Germany, Indonesia, Saudi Arabia and the UAE
Many US and European companies have accumulated large cash balances available for acquiring new businesses. Financial sponsors also have the potential to boost global transactions, with private equity firms sitting on a record $1.1 trillion in uninvested capital. Cross-border transactions will play a significant role as companies look to gain market presence in high growth markets.
Regional M&A forecast
• North America will experience strong levels of deal-making for the next three years, particularly the US.
• M&A deals in Europe will rise, driven largely by inbound transactions by US companies taking advantage of a strong US dollar.
• Asia will re-emerge as one of the world’s most dynamic growth stories, beginning with a resurgence of cross-border transactions next year.
• Growth prospects in Latin America will improve as a result of policy reforms in countries like Mexico.
• Africa and the Middle East will see more deal-making activity as oil prices rebound over the next few years.
Regional IPO forecast
• Domestic IPOs in North America will recover from last year’s dip, pushing toward a new record of $82 billion by 2017.
• IPOs in Europe will slow this year, amid uncertainty linked to parliamentary elections, with an upswing in activity to return next year.
• IPO activity in Asia Pacific will accelerate over the next three years, peaking at $87.4 billion in 2018.
• Emerging markets-based companies will continue pursuing cross-border listings to raise capital in deeper, better capitalized markets in the US and UK.
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