Telecommunications, Media & Technology

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.

Acquirers will hunt for synergistic acquisition plays to supplement the organic growth storey, therefore trade activity will pick up again. They may attempt to add specific technological skills supported by their own IP, as well as increasing scale in geographically strategic regions, such as the United Kingdom.