Tech leaders are optimistic about the future of cross-border M&A
Strategic drivers continue to fuel cross-border deals despite economic and geopolitical uncertainties
Technology sector confidence is high. In 2018, deal value rose to US$145.1 billion, up 7 percent compared to 2017. Volume remained steady with a 1 percent decrease year-on-year, which suggests valuations were up considerably. These figures are consistent with overall global MA trends in a year that turned out to be one of the best on record.
But what's in store for the future? We conducted a survey of 150 tech executives around the world to gauge their expectations for cross-border dealmaking over the next two years. We found that most respondents remain optimistic despite rising valuations, growing regulatory scrutiny (including tightened national security measures in the United States and abroad), interest rate hikes and a rising mood of protectionism.
Sixty-two percent of the executives we surveyed expect to do additional cross-border tech acquisitions over the next two years. Their aims are strategic. For many acquirers, the right deal means survival in the face of accelerating technological disruption. The desire to grow the customer base was the top deal driver, mentioned by 69 percent of respondents seeking to expand geographically, extend product ranges or offer current products on new platforms. Cited by 46 percent of respondents, the need to gain new IP to deepen capabilities and enable growth was the second-most common motivator.
But dealmakers' enthusiasm has limits. Almost half of respondents, 44 percent, said they had walked away from potential cross-border deals. Of that group, 57 percent indicated their decision to leave the negotiating table stemmed from changes in the macroeconomic climate, including less balanced economic expansion around the world and greater downside risks, such as the threat of possible trade wars.
Considering the next 12 months, 47 percent pointed to trade wars and rising protectionism as the most significant geopolitical factor affecting acquisition strategies. Respondents' optimism was also tempered by tensions between the United States and its traditional allies (29 percent) and Brexit (24 percent).
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