In the first half of 2022, technology, media and telecoms (TMT) dominated M&A in the US, with more deals being completed than any other sector. The three largest M&A transactions of the year are technology companies. Microsoft bid $75.1 billion for gaming company Activation Blizzard, chipmaker Broadcom offered $71.6 billion to acquire software company VMware, and Elon Musk offered $41.3 billion to acquire Twitter, which has since fallen through. 

Technology remains at the heart of the US’s ever-expanding economy, and investors are keen to have a slice of the pie. The sector has a wide-reaching impact influencing finance, energy, healthcare, and several other vital industries. Of course, we know that these sectors have always been prone to disruption from new technology. This is why remaining competitive in this era of accelerated tech advancement is key to success. 

With these being attractive targets and high, accelerated competition for completion, and the pace of change in the TMT sector means that innovations quickly become legacy solutions. Consequently, diligence needs to be as swift and sharp as it is robust.  And the fastest way to diligence in such a highly competitive market is to take a data-led approach. 

2021-2022 TMT M&A Trends

The TMT industry had a record-breaking M&A year in 2021, with a 48 per cent increase in transactions, and a total sale value increase of 83 per cent, from $514 billion to $941.1 billion. Compared to the first half of 2021, deal activity decreased 37 per cent year on year. However, deal values increased by 57.6 per cent compared to the previous year, largely owing to several tech megadeals.

Private equity acquisitions

Although tech buyers have spare cash and the public markets’ lower values could encourage merger and acquisition activity, the private equity market has not yet experienced a similar adjustment. As a result, private equity players remain cautious in the face of climbing borrowing rates. 

Despite this, private equity deals are driving plenty of deal activity, comprising 42 per cent of deals in the past 12 months. The value of private equity deals was close to £200 billion in value, with around three-quarters of the value focused on internet and software acquisitions. 

TMT Diligence Case Studies

Onefourzero’s data-led, tech-enabled approach to TMT due diligence allows us to deliver robust, low-latency diligence on the buy-side and sell-side. Using present and historic data sets, we create viable growth models or stress-test assumptions surrounding commercial growth. We’ve conducted due diligence for several companies in the TMT sector, including a fishing tech company, a SaaS platform, a legal lead generation business and more.

Fishing Tech Company 

A private equity firm approached onefourzero to conduct commercial due diligence on a fishing technology company. We conducted a comprehensive assessment of the completeness of the target’s three-year CapEx budget across IT infrastructure, IT security and software development. 

Our approach

Over several weeks, we conducted interviews with senior management to determine:

The deep-dive interviews with the asset’s senior IT staff and CEO allowed us to gain a holistic understanding of the company’s current capabilities. In addition, we leveraged our proprietary Digital Capabilities Audit, assessing IT infrastructure, software development and tech-enabled commercial models alongside the asset’s broader digital culture. Finally, we performed a detailed analysis of CapEx and OpEx budgets to assess potential barriers to execution as the company scales its digital operations. 

Sales Software

Following an investment from a private equity firm, a cloud-based SaaS platform approached us to conduct a value creation report and digital market review to understand the competitive landscape, marketing white space and potential new prospect areas to inform its intended marketing investment. 

The sales software company wanted answers to several vital questions:

Our approach

We analysed audience demand across search behaviour, branded intent and online footfall metrics to assess where growing demand can be met. Additionally, we determined which specific locations should be targeted in the asset’s growth strategy. 

We also conducted benchmarking activities across social media, forum, review and blog platforms to pulse-check brand health and identified potential red flags that could impede future growth. Finally, we used search demand growth index metrics alongside broader macroeconomic and demographic indicators to identify key expansion regions for bolt-on acquisitions.

Final Thoughts

The TMT industry experienced a record-breaking year in 2021. In 2022, the industry continues to thrive. While deal numbers decreased, deal value increased significantly as several large firms acquired technology assets. But firms looking to acquire technology assets should ensure that robust due diligence is conducted to ensure they are a strategic fit.

Onefourzero delivers digital commercial insights spanning the full private equity deal lifecycle. Over the past few years, we’ve conducted data-led diligence for several influential companies in the TMT sector on the buy and sell side, allowing stakeholders to gain a holistic understanding of assets’ capabilities.