Our thinking

Cross-border tech M&A in a disrupted world

What's inside

Despite an uncertain economic and political outlook, tech companies are still doing cross-border deals, and activity in 2018 was remarkably strong.

Tech executives are optimistic but practical about cross-border M&A

A majority of the 150 senior tech executives we surveyed expect to do more cross-border M&A in the next two years—but they may walk away from deals if economic conditions change.

By Dr. Tobias Heinrich, Daniel Turgel, Farhad Jalinous, Carola Glasauer, and Danli Guo

Cross-border dealmaking across the tech sector remained buoyant in 2018. In the first three quarters of the year, deal value rose to US$89.4 billion, up 1.5 percent on the same period in 2017.  With volume dropping by 11 percent, this suggests that valuations were up considerably. This is largely in line with overall trends for global M&A in a year that could rank as one of the best on record.

However, with economic and geopolitical headwinds, the outlook for the future is decidedly uncertain. Mindful of that, we conducted a survey of 150 tech executives around the world to gauge their expectations for cross- border dealmaking over the next two years—and to gain a better understanding of the challenges they face when doing cross- border deals.

Their expectations are high. The majority of respondents, 62 percent, said that they expect to do additional cross-border technology acquisitions over the next two years. This figure speaks both to the optimism that executives have about the future, as well as the importance of cross- border M&A for companies in the technology space.

But their optimism comes with an apparent caveat. Almost half of respondents, 44 percent, indicated that they had walked away from potential cross-border deals in the past. And 57 percent of this group (more than one-third of respondents overall) said that they had walked away from deals due to changes in the macroeconomic environment.

This is a significant figure, given that there seems to be a growing consensus that the macroeconomic environment could be transformed over the next two years. In April, the International Monetary Fund (IMF) estimated that global GDP would grow at 3.9 percent in both 2018 and 2019 but that the global economy will slow down in 2020. The IMF affirmed this view in October, but it added that economic expansion had become less balanced around the world, peaking in some major economies, and that downside risks had increased, including the threat posed by possible trade wars.

Indeed, 47 percent of respondents point to trade wars and rising protectionism as the most significant geopolitical factor affecting acquisition strategies over the next 12 months. And 70 percent of those who said they had walked away from deals said that political interference was an important factor in the decision.

Our report highlights these and other important trends affecting cross-border M&A in the tech sector, as well as examining the opportunities and challenges that dealmakers face when pursuing deals across borders.



In H2 2018, White & Case, in partnership with Mergermarket, surveyed 150 senior-level executives from technology sector companies that have completed at least one cross-border transaction in the past 24 months and have an annual minimum turnover of US$100 million. The aim of the survey was to analyze dealmaker sentiment including the strategic drivers of cross-border deals over the next 12 to 24 months, and to identify challenges and issues facing dealmakers. Job titles included CEO, CFO, Head of Strategy and Head of M&A.

Regional breakdown

North America - 60
EMEA - 60
Asia-Pacific - 30

Tech deals defy changing times

Sixty-two percent of tech executives are planning a cross-border technology acquisition in the next two years.

Challenges remain

Half of executives cite trade wars and protectionism as significant factors.

No shame in walking away

Fifty-seven percent of executives said they had walked away from a deal due to changing macroeconomic conditions.


John Reiss

John Reiss
Partner, New York


Gregory Pryor

Gregory Pryor
Partner, New York


Allan Taylor

Darragh Byrne
Partner, Frankfurt, Stockholm


Allan Taylor

Allan Taylor
Partner, London


John Cunningham

John Cunningham
Partner, London


Alexandre Ippolito

Alexandre Ippolito
Partner, Paris


Christopher Kelly

Christopher Kelly
Partner, Hong Kong


 Barrye Wall

Barrye Wall
Partner, Singapore


Challenges remain: Geopolitics and regulations can be decisive

5 min read

Percentage of respondents who point to trade wars and rising protectionism as one of the most significant geopolitical factors affecting acquisition strategies over the next 12 months

Despite the opportunities available in the market, the changing face of global politics is exerting an increasing influence over deals. Almost half of respondents (47 percent) point to trade wars and rising protectionism as one of the most significant geopolitical factors affecting acquisition strategies over the next 12 months. This is followed by US tensions with traditional allies (29 percent).

Meanwhile, nearly a quarter (24 percent) point to Brexit as an important factor. A CFO of a France-based cloud computing company says: "Brexit has affected our European M&A plans. Unless the environment becomes clear, we are not quite sure of finalizing any acquisition in Europe. We are instead looking for acquisitions in other regions where the growth and opportunities are better."

In addition, executives are feeling increasingly challenged by the regulatory environment in cross-border deals. Thirty-nine percent say that they were unsuccessful in this area and that there is significant room for improvement.

View full image

While tougher rules on inbound investment in the West are primarily meant torein in growing Chinese influence, they raise the regulatory bar for any cross-border acquirer of sensitive tech assets.


Too many rules spoil the deal?

When we examine the deal process itself, a majority of respondents noted that their biggest mistake was failing to study local market regulations sufficiently in advance. "There were an awful lot of procedures to follow," says one technology executive. "The biggest problem was identifying those procedures: foreign regulatory approval; reform commission; antitrust administration; national security authority; and many more. You need experienced advisers, otherwise it takes a very long time to get clearance."

Asked to name the top two legal and regulatory challenges faced during acquisitions, respondents selected antitrust (61 percent), taxes (55 percent) and national security reviews (27 percent).

And antitrust rules are tightening around the world. "With Trump as president and strict policies to restrict foreign companies, antitrust is now the most challenging regulatory hurdle," says the finance director of a UK-based cyber- security company.

Governments are also taking stronger approaches to reviewing deals for national security threats, particularly when they involve technology. The Committee on Foreign Investment in the United States (CFIUS), which scrutinizes foreign investments in the US, recently had its remit expanded. In August, the government introduced the Foreign Investment Risk Review Modernization Act (FIRMMA), which is widely seen as intended to curb Chinese influence. Among other things, FIRMMA extends the power of CFIUS to scrutinize deals involving sensitive personal data and critical technology.

"The USA is going overboard with its national security concerns," says the SVP of an India-based telecommunications company. "I fail to understand why they interpret every deal as a threat to their security. Even with those which have nothing to do with national security, they keep delaying approval."

The UK has also tightened merger scrutiny, giving the government greater powers to review cross- border tech deals. Meanwhile, momentum for stronger investment controls is building in Europe, both at the EU level and for individual states. Germany, for example, recently vetoed a high-tech manufacturing takeover.

While tougher rules on inbound investment in the West are primarily meant to rein in growing Chinese influence, they raise the regulatory bar for any cross-border acquirer of sensitive tech assets. Even foreign- to-foreign acquisitions can fall afoul of cross-border rules in third-party jurisdictions if the target has end- customers or relevant activities in that country.

"Since the change of leadership in the USA, we have seen a lot of policy changes creating an uncertain business environment. Making an acquisition in such an environment is a challenge we don't want to face at present," said the SVP of an India- based telecommunications firm.

View full image


Due diligence in the deal

When it came to due diligence on regulatory and compliance matters, 35 percent of respondents said gauging the target's exposure is the greatest challenge, and 28 percent cited understanding how responsibility for compliance issues is allocated within the company is the most difficult.

These responses highlight the ongoing need for acquirers to engage competent regulatory counsel in the target jurisdiction early in the process. In particular, a tech target may be subject to privacy, national security or import/export regulations that warrant in-depth review.

View full image

View full image


Culture is a perennial challenge

In addition to regulatory matters, our survey examined due diligence challenges across the deal process. In terms of cultural due diligence, evaluating the fit between the target and the acquirer's culture was the biggest issue, according to 39 percent of respondents

Overall, 74 percent say cultural differences made negotiations and due diligence more difficult, to some degree. "The market has evolved and information is easily available now compared to ten years ago, but at the same time complexities have also increased," says the SVP of an India- based telecommunications firm. "Our due diligence was not sufficient. Cultural aspects were something we misjudged completely—there was far more difference than we anticipated."

View full image


Lack of info scuppers tech due diligence

Insufficient information about the target company's assets is seen as the biggest challenge in doing tech and IP due diligence.

Due to the importance of trade secrets and other proprietary or information to their businesses, technology targets may prefer to limit the amount of information disclosed to a bidder until a firm offer is on the table. A bidder will have similar but opposite concerns. In a cross-border deal, this dynamic can be exacerbated by unfamiliarity with the target's or acquirer's jurisdiction and differing practices regarding the depth and pace of due diligence.

View full image

View full image



This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP