Telecommunications, Media & Technology
The TMT market has proven resilient in recent times, with many platforms reaping the benefits of a large number of annuity revenue streams while simultaneously providing mission-critical services to long-term clients. Managed IT, unified communications, cloud, and security services became more important than ever in a year when online communication and services were at the forefront.
Technology M&A activity fluctuated between historically low and high quarters during the pandemic. Companies soon shifted gears, and IT mergers and acquisitions skyrocketed. Tech businesses are altering their M&A strategy to focus more on a target’s business resiliency, digital technology alignment, and gaining market share through consolidation in order to position themselves for future revenue growth.
Market View
- The strength of the sector, reasonably solid recurring revenue models, and vendors hesitant to accept a lower price have all contributed to a rise in TMT M&A valuations over pre-COVID-19 levels. However, in certain circumstances, transaction structures may have changed to reflect more difficult pipeline visibility and a slowdown in prospect conversion. A smaller amount of transactions, with only high-quality assets coming to market at this time, could potentially be a role.
Market Outlook
Many digital transformation programmes have accelerated as a result of remote working, and public-sector-focused TMT firms have been among the best performers, able to capitalise on rising government digital spending.
Private equity (PE) and enterprises with PE ownership that are pursuing a buy-and-build strategy are still quite active in the sector.
TMT remains a fragmented sector, with a number of owner-managed enterprises attracting trade acquirers, private equity, and private equity-backed trade pursuing a buy-and-build approach.
In the post-COVID-19 environment, PE spending in some infrastructure services that have proven to be particularly durable may even accelerate.
