It was good to see this week’s Mergermarket Technology Forum backing up the assertions that we made in our Wire publication earlier this year – namely that mega-deals in the TMT market are, with a few exceptions naturally, in a serious state of decline whilst mid-market activity continues to be robust. Panellists at the forum held in San Francisco on Tuesday also noted that we should expect to see more M&A activity involving Unicorns, as the billion dollar babies start to see a drop in their valuations to more logical levels.
David Locala, Head of Global Technology M&A at Citi, commented: “We have seen a real drop off in mega deals… That’s a function of the financing markets, political uncertainty and interest rates starting to move up.” Whilst these external factors are, without a doubt, major considerations for the big hitters in the TMT world, it also feels like this slowdown in larger transactions could be due to a general change in sentiment. History has shown us again and again examples of mega-failure in mega-deals, and our intelligence suggests that corporates are starting to favour smaller deals which add niche capability without the headache of a major integration process.
Interestingly, panellists also predicted that – despite a slow start to the year – TMT M&A in North America should recover later this year, even if it fails to reach the levels seen during 2015. Factors such as the poor IPO market, an abundance of capital from both strategics and Private Equity, and that rebasing of valuation expectations appear to indicate that the good conditions we are currently experiencing could be around for a while longer yet (touching wood).