Other drivers include the need to attain innovative technology, talent and other capabilities.
Environmental, social and governance (ESG) emerged as an increasingly important aspect influencing the deal decisions, with 46% of tech CEOs recognizing it as an extremely important value driver for the next few years.
While valuations remain high, risks of deals being cancelled — due to disagreements over valuations and geopolitical disruptions — remain. Companies need to plan carefully and thoroughly consider the risks and rewards of any potential deal. They need to avoid the temptation to rush into a deal to fill a revenue gap, but rather make focused decisions to help generate deal success.
Geopolitical and supply chain disruptions
Geopolitical tensions and supply chain issues have posed a major disruption in the technology industry. More than half (59%) of tech CEOs note that geopolitical challenges are forcing adjustments in strategic investment decisions, while 72% have adjusted or planned to adjust their supply chains or operations.
Hardware-oriented subsectors have been at the forefront of supply chain disruptions. Eighty-eight percent of semiconductor CEOs say they have adjusted their supply chains, with the current chip supply crunch being one of the catalysts. In conjunction with this, the communication and networking equipment subsector witnessed a significant impact, with 85% of CEOs saying they have adjusted their supply chains.
Amid the rise of geopolitical uncertainties, data risks have taken center stage in the M&A process. Stakeholders are now considering data privacy, security and ransomware issues during deal negotiations, especially in cross-border deals where they need to give M&A targets additional scrutiny.
Geopolitical issues have hit cross-border transactions hard. In fact, 31% of tech CEOs say they had to stop a planned cross-border investment in the past 12 months due to geopolitical disruptions.
While tech CEOs recognize the impact of geopolitical factors on their businesses, it is imperative that they incorporate them into a broader risk management strategy. As technology companies are forced to adjust their supply chains and rethink business decisions, the need for companies to reimagine, reshape and reinvent their business fundamentals for the future should be on top of the agenda.