Mergers and acquisitions (M&A) activity continues to serve as a significant indicator of the health and growth of our markets. M&A volumes reached record levels in 2021, with the lower-middle market deal flow particularly rising to new heights. This increase in M&A activity is a result of the COVID-19 pandemic’s impact on the global economy, with companies seeking to expand their operations and enter new markets to counteract the risk of an economic downturn. So is M&A still strong for IT businesses?
Is M&A still strong for IT businesses?
Lower-middle market M&A refers to sub $100 M transactions in total deal value, occurring between privately held companies or between a privately held business and a publicly traded company. Many of these transactions do not get the recognition that major deals get in the media, such as Microsoft’s multi-billion acquisition of Activision Blizzard. However, this is not to say lower-middle market deals are any less important.
The demand for IT businesses remains strong, driven by continued digital transformation in various industries. This demand has led to a surge in M&A activity in the technology sector, with lower-middle M&A transactions playing a significant role. It is possible that trends in alternative energy, artificial intelligence, and other significant technology developments will continue the acceleration we are experiencing. This shows M&A still strong for it businesses.
Recent M&A statistics
According to Statista.com here are some noteworthy statistics on M&A:
Over 500,000 merger and acquisition (M&A) deals have been completed globally since 2010.
63,000 completed deals during 2021
Despite higher interest rates and an impending recession, demand for these small IT business deals remains strong. ITX has a global database of 55,000 buyers seeking IT-enabled businesses that allows users to simultaneously market their business to multiple interested parties.
One of the primary reasons for the increase in lower-mid market M&A activity is the need for companies to stay ahead of the changing markets. Companies in the IT space are also moving forward with higher demand across channel partners to meet their ever-changing classifications. We witnessed Microsoft challenge its partners by dropping their former status signifiers (gold, silver, bronze). With the increased adoption of technology, companies are looking for ways to differentiate themselves and remain atop the competition. This has led to a greater emphasis on acquiring technology companies and their assets, including intellectual property, customer bases, and expertise.
Business digitalization drives need
Another factor driving the demand for IT businesses is the growing need for companies to digitalize their operations. The pandemic has accelerated the digital transformation of many businesses, and as a result, there has been a surge in demand for technology companies that can help companies transition to a digital environment. More recently we have seen AI take a front seat for investments from tech giants like Google and Microsoft.
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