Why now is the time for tech companies to explore M&A opportunities

The state of the economy in the technology industry has had a major impact on the M&A market. In times of uncertainty, companies tend to engage in mergers and acquisitions (M&A) to gain market share or merge their position. One of the main drivers of this activity was economic uncertainty as companies tried to bulk up to weather potential storms. Low interest rates and better access to capital also played a role, making it easier for companies to finance deals.

The healthcare, technology and consumer industries engaged in mergers and acquisitions as companies sought to tap growth markets. In 2023, the outlook for M&A activities will be favourable. She project the economy will continue to grow, albeit at a slower pace than in recent years.

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M&A market overview

• Uncertainty fuels M&A activity: The current state of the economy has created an uncertain business landscape. In times of uncertainty, companies try to merge to increase market share, eliminate competition and cut costs. This has resulted in an increase in mergers and acquisitions (M&A) activity.

• Megadeals boost M&A market: As the global economy continues to recover from the Covid-19 pandemic, many experts predict that the M&A market will see an explosion of mega deals in the coming years. With companies and private equity firms sitting on significant amounts of cash and interest rates remaining low, there will be a lot of activity in the M&A market in the coming years. In the coming years, some of the targets for mega deals include technology, healthcare and energy companies.

Main drivers of M&A activities

• Economic uncertainty: As we enter 2023, a lot of economic uncertainty is impacting M&A activity. This uncertainty stems from several factors, including the ongoing pandemic, trade tensions and political instability. This environment makes it difficult for companies to plan for the future, affecting their ability to make long-term strategic M&A decisions.

• Interest Rates: As we expect interest rates to rise, M&A in 2023 will be fascinating to watch. This could lead to a wave of consolidation across industries. It will be interesting to find out if companies will pay higher prices for acquisitions or if they will be more conservative with their capital.

• Access to capital: Availability of capital is a critical driver for M&A, and we expect it to remain so in 2023. Strong balance sheets and access to capital will help companies seize opportunities. We hope there will be more M&A among large companies looking to merge their positions and increase their market share. Mid-market companies will also be active as they look to grow through acquisitions.

Related: When Two Become One: Mergers and Acquisitions as a Growth Strategy for Your Startup

Key sectors for M&A activities

• Healthcare: Healthcare is expected to be one of the critical industries for M&A by 2023. The combination of an aging population and advances in medical technology is driving demand for health services, which is expected to continue for the next decade. Healthcare companies are also attractive targets for M&A activities due to the high barrier to entry. The healthcare sector is expected to continue to grow at a rapid pace, and this will create opportunities for companies to expand their business through mergers and acquisitions.

• Technology: As the world increasingly relies on technology, it comes as no surprise that the industry is expected to see more M&A activity in 2022. With companies looking to take advantage of the latest trends and technologies, we can expect a lot of movement in the industry as companies look to consolidate. their positions or enter new markets. This increased activity will provide investors with some great opportunities, so it will be one to look forward to in the year ahead.

• Customer: With technological advancements and increased global competition, companies expect the consumer sector to be dynamic in the M&A market in 2022. The consumer sector is consolidating as companies try to gain market share and economies of scale. We probably see an expansion of M&A activity in this sector as the cause.

M&A market outlook

• Increased Volatility: As economic and political uncertainty increases, the M&A market is expected to become more volatile in 2023. This is because companies are less likely to make significant investments during periods of uncertainty and tend to be more conservative with their budgets. This can lead to a reduction in the number of M&A deals that are completed, as well as the value of those deals.

• Offers will be bigger: The average size of M&A should increase as companies consolidate to increase efficiency and scale. We expect the healthcare and technology sectors to see the most critical deals from the continued consolidation in these sectors.

Related: Do’s and Don’ts for Mid-Level Organizations Entering Mergers and Acquisitions

Technology companies look for opportunities to grow through acquisitions. The M&A market is picking up and there are more opportunities than ever before. Now is the time to take action on your acquisition plans. Contact an M&A advisor to help you navigate the market and find the right target for your tech company.