- 58% of global TMT executives set to pursue M&A, up from 42% 12 months ago
- M&A appetite steady among technology companies, despite deal slowdown
- 62% of all executives are dedicating 25%-49% of investment capital on technology
Despite citing regulatory and geopolitical uncertainty as the greatest external risks to growth,¹ 58% of technology, media & entertainment and telecoms (TMT) executives expect to actively pursue mergers and acquisitions (M&A) in the next 12 months – up from 42% a year ago. This is according to the latest edition of the EY Global Capital Confidence Barometer (CCB), which also finds that 63% of global TMT executives expect to see more megadeals (US$10b+) in the next 12 months.
Optimism is underpinned by strong confidence in economic conditions, with 77% of executives anticipating growth in the global economy and 58% indicating that they do not expect to see an economic slowdown in the near to mid-term. Eighty percent also expect an increase in cross-sector M&A, driven by the need to accelerate investment in technology and digitization.
Technology deal appetite endures despite geopolitical headwinds
While the second half of 2019 has seen a slowdown in technology M&A,² industry executives continue to have a healthy appetite for dealmaking. Fifty-nine percent of CCB respondents expect to pursue M&A in the next 12 months – up from just 40% a year ago and 7% above the average across all industries.
Most executives (83%) also expect to see sector growth, only falling short of the peak optimism recorded six months ago (92%) in the wake of continued geopolitical uncertainty.
Ken Welter, EY Global Technology Transactions Leader, says:
“Enthusiasm for technology M&A has been tempered by ongoing trade and tariff issues, the persistent specter of Brexit and the underwhelming performance of high-profile tech IPOs. But even in this landscape, a strong dealmaking appetite among global executives underscores the importance of M&A as a critical strategic tool to drive growth, quickly acquire talent and capabilities to gain competitive advantage, and weather geopolitical volatility.”
M&A is the fastest route to growth for media and entertainment companies
The upward trajectory in dealmaking for media and entertainment companies is set to continue according to the CCB. Fifty-nine percent of executives expect to pursue M&A in the next 12 months – up from 42% in October 2018. Sixty percent anticipate more megadeals in the next 12 months, while 79% expect the sector economy to improve, up from 48% year-on-year.
In an industry driven by people, 63% report having difficulty hiring talent – particularly those with tech and other specialist skill sets. Also pressing is rising competition from startups, with 24% stating that the biggest impact of digital transformation is new players entering the market.
Will Fisher, EY Global Media & Entertainment Transactions Leader, says:
“Despite some uncertainty about market direction, most media and entertainment companies are positive in their outlook and are looking to M&A as the fastest route to acquire the capabilities that will accelerate growth. Executives are acutely aware that a new business model or route to market can quickly undermine competitive strengths. Proactively scanning the evolving industry landscape is, therefore, an imperative for today’s companies.”
Digitization and portfolio transformation drive active deal agenda for telecoms
Dealmaking intentions remain healthy for telcos, with 50% of executives preparing to pursue acquisitions in the next 12 months, above the long-term sector average of 46%. This is characterized by a need to transform portfolios, with 55% of executives planning to outsource or divest some of their current operations. Nearly a third (31%) of executives see competition from existing competitors and new market entrants as the biggest threat to growth.
The CCB highlights that new technologies, including artificial intelligence (AI) and 5G, are a critical focus for telcos. Indeed, 87% believe digital transformation is an opportunity to reposition overall business strategy.
Axel Majert, EY Global Telecommunications Transactions Leader, says:
“While telecoms deal value has been lower in 2019 year-on-year, operators remain cautiously optimistic. In-market consolidation continues to be important, but the nature of M&A is shifting as operators seek to unlock value of infrastructure assets such as towers, fiber and data centers. In addition, operators now view M&A as a means to navigate the transformation agenda and are increasingly looking to take advantage of digital growth opportunities.”
For more insights on the Technology, Media & Entertainment and Telecommunications CCB findings, please visit EY sector pages.
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About EY Global Capital Confidence Barometer
The EY Global Capital Confidence Barometer gauges corporate confidence in the economic outlook, and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY framework for strategically managing capital. It is a regular survey of senior executives from large companies around the world, conducted by Thought Leadership Consulting, a Euromoney Institutional Investor company. The panel comprises select global EY clients and contacts and regular Thought Leadership Consulting contributors.
- In August and September, Thought Leadership Consulting surveyed on behalf of EY a panel of more than 2,900 executives in 45 countries; 70% were CEOs, CFOs and other C-level executives.
- Respondents represented 14 sectors, including financial services, consumer products and retail, technology, life sciences, automotive and transportation, oil and gas, power and utilities, mining and metals, advanced manufacturing, and real estate, hospitality and construction.
- Surveyed companies’ annual global revenues were as follows: less than US$500m (25%); US$500m–US$999.9m (25%); US$1b–US$2.9b (18%); US$3b–US$4.9b (10%); and greater than US$5b (22%).
- Global company ownership was as follows: publicly listed (57%), privately owned (31%), family owned (9%) and private equity portfolio company (3%).