Part of this dealmaking activity is driven by activist shareholders who are compelling 85% of executives to act — for 36% that action relates to making acquisitions and for 29% the action is for assets to be divested. The main rationale for TMT acquisitions is acquiring technology, talent, new production capabilities or innovative startups (23%), followed by sector convergence and growth into adjacent business activity (22%).
Favorable conditions foster deals
The strong dealmaking intentions are underpinned by confidence in economic conditions, with 94% of TMT executives expecting global economic growth to improve, and the majority also expecting corporate earnings, credit availability and equity valuations to improve (87%, 87% and 76%, respectively). This leads just over half of executives (53%) to cite expected revenue growth rates of between 11% and 25% in the coming year, although 33% say the greatest external risk to the growth of their business is slowing economic activity.
Technology investments are in demand
All TMT executives are planning significant investment in technology this year, as they look to create new services and products, reduce risks, improve the customer experience, improve financial data access and improve internal efficiencies — all in equal measure. They are also looking to address one of the most significant challenges to their company’s growth plans — disruption from more technologically advanced competitors.
Disruption drives portfolio reshaping
In the midst of active dealmaking, the shift toward continual portfolio reviews continues, as 77% of executives are now reviewing their portfolio at least every six months — up from 65% in October 2018. Activists, and increasingly boards, are driving large TMT incumbents to perform frequent portfolio reviews. These reviews are identifying underperforming, or at risk of disruption, assets, driving product divestitures or areas where M&A can drive growth.