The first half of 2021 saw continued optimism in global technology, media and telecommunications (TMT) M&A activity with record capital supply and investments triggered by initial public offerings (IPOs) of special-purpose acquisition companies (SPACs), and venture capital (VC) funding. Three trends, in particular, define the current TMT M&A landscape globally.
“Industry disruptions and huge opportunities from digitisation and technology, combined with the availability of capital, create a foundation for continued record M&A activity. We should expect new and thriving companies to be leading the charge on acquisitions, not just big tech players.”
We expect the following areas to be M&A hotspots during the next six to 12 months:
Cryptocurrency deals could grow rapidly in the second half of 2021—both in M&A and fundraising—as the industry matures, with large players looking to institutionalise:
Highly concentrated industries could present an opportunity for disruption and M&A activity in the near future as companies deploy disruptive technology to lower costs, grow revenues, and redraw competitive boundaries. Historically, we’ve seen new players emerge to shake up previously highly concentrated industries and a select-few new players growing to assert their dominance—as Amazon did for retail, and Tesla for automobiles. Looking ahead, we think similar trends could emerge in highly concentrated industries like healthcare, financial services, and telecommunications that are seeing new entrants and are ripe for tech disruption.
The pace of growth in artificial intelligence applications in 2021, accelerated by COVID, suggests increased adoption in areas like cybersecurity, workflow management, sales and customer support. This could lead to more M&A activity and funding in 2021—though there is reason for caution. For such investments to pay off, many companies will need to act aggressively to adapt their talent strategies, organisational structures, business strategies, development methodologies and risk mitigation for a world that moves at AI speed.
Global deal values and volumes in the first half of 2021 exceeded those seen in the second half of 2020, reaching record-level highs. As the economy speeds through recovery, some companies and investors look to unload dry powder accumulated during the pandemic to accelerate their growth strategies, while others look to deleverage and free up cash for future investments. TMT saw 25 megadeals announced in the first half of the year at a combined value of approximately US$300bn, the same number as were announced in the second half of 2020. We expect this momentum from megadeal volumes and values over the past year to carry into the second half of 2021.
Traditional industry boundaries are converging as technology becomes front and centre across every industry, creating opportunities for M&A. New entrants and tech disruptions are redefining business models and changing the way we live our lives, as we’ve seen with the emergence of industries like HealthTech, FinTech, and CleanTech. In addition to seeing industry boundaries converge, we are also seeing the convergence of multiple technologies.
The auto industry, once reserved for large national brands, is seeing companies emerge across the globe that interweave new technology with old offerings (Tesla/Lucid Motors/Nio). Similar disruption has been seen in other areas: retail (Amazon/Alibaba), fitness (Peloton/Mirror), payments (Stripe/Square), financial services (Robinhood/SoFi). These are not the last innovators, and in 2021 we expect to see several more tech-focused companies emerge and disrupt other sectors. We believe this will likely lead to further deal-making, led by large corporations seeking to acquire or enhance existing capabilities and transform their own businesses.
In the telecom sector, some companies are exiting their non-traditional investments (e.g., media) and consolidating their portfolios to free up cash for investment in 5G. For example, in the US, Verizon and AT&T divested parts of their non-core businesses last year; and in 2021, Canada’s and Spain’s large telecom companies are merging for scale to prepare for high-intensity competition.
We don’t expect the deal-making to end soon, as the telecom industry is poised to utilise its increased cash flows and scale to increase investments in its core businesses. Telecom companies may invest in infrastructure (towers, data centres, fibre, etc.) or build out 5G through acquisitions. Each may pursue its own respective strategy, but we can expect an increased focus on verticalisation as companies build out their infrastructure and technology.
We are optimistic about the potential for M&A value creation that lies ahead for 2021 and beyond. Huge opportunities from digitisation and new industry disruptions, along with record levels of capital and investments triggered by IPOs and SPACs, have established a foundation for continued robust M&A activity this year.
To compete in a growing, fast-paced environment, companies will need to be bold and adopt a value creation mindset to M&A strategy to best position for an ever-changing future.
About the data
We have based our commentary on M&A trends on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 30 June 2021 and as accessed on 5 July 2021. This has been supplemented by additional information from Dealogic and our independent research. This document includes data derived from data provided under license by Dealogic. Dealogic retains and reserves all rights in such licensed data. Certain adjustments have been made to the source information to align with PwC’s industry mapping. We define megadeals as transactions with a deal value greater than US$5 billion. In addition, certain data on crypto M&A has been based on data extracted from MergerMarket, Capital IQ, Crunchbase, Pitchbook, Coindesk and CoinTelegraph for the period 1 January 2020 to 31 December 2020.