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Can your inorganic growth strategy adapt to the convergence era?

Executing transactions amid high valuations and uncertainty in a rapidly changing TMT landscape


Business model change and still-rising competition fuel TMT M&A

Technology, media and entertainment, and telco (TMT) companies’ business strategies are converging — and in flux.

TMT is transforming rapidly, amid great uncertainty, as relentless innovation powers the development of new services and business models while often creating faster or lower-cost ways of doing what’s possible today.

From 2014 through 2016, TMT M&A values soared, witnessing three straight years of more than 100 deals valued at over $1 billion — and 2017 just missed that level, with 95 $1 billion-plus deals.

The findings of EY’s 17th Capital Confidence Barometer, however, give us reason to be bullish about TMT M&A to come.

Convergence along many dimensions!

To paraphrase venture investor Marc Andreessen, technology companies are “eating” the world economy. But hang on: at the same time, the rest of the world wants to “eat” technology, too.

In addition to the trends driving overall TMT M&A, there are specific trends driving cross-sector convergence — both within and outside TMT. “There’s hardly a company left that doesn’t think technology is going to be core to their ability to succeed in the marketplace,” notes Clarence Mitchell, EY Global TMT Strategy Leader.

But that bidirectional megatrend isn’t the only catalyst for “convergence deals” among TMT’s three sectors. There’s also the “re-merger” of content and distribution, leading to convergence among media and entertainment (M&E) and telco; the insurgence of tech companies into M&E, with large content appetites (and budgets) of their own; and tech companies’ appropriation of telco customer demand with apps and services that, ironically, rely on telco network investments.

M&A has become an imperative. Gone are the days when M&A was an occasional option for building great TMT companies. The relentless pace of technology and business model disruption now requires M&A to be a continuous and ongoing element of any effective TMT strategy.”

– Clarence Mitchell, EY Global TMT Strategy Leader, Advisory Services

Partnerships rising

As potential future business models multiply and evolve, complexity, convergence and the need for scale and speed to market are all accelerating each other. A wise TMT company needs more bets on the table than can be covered by M&A alone.

That’s why one of the clearest data points to emerge from our research is the rapid growth of strategic alliances and partnerships across all three TMT sectors. Beyond the data, however, EY has seen a qualitative change in the nature of TMT partnerships.

“Many past partnerships were looser affiliations,” says Mitchell. “Alliances today in TMT are frequently more significant and tightly integrated. Partners are sharing data, jointly developing products and offerings, and actively building ecosystems and platforms. There is more real operational integration between partners.”

Owning demand — the customer relationship — not the supply is the key to verticalization. You have to own the customer by providing a total solution or own a key piece of the value chain contributing to someone else’s solution."

– Will Fisher, EY Global Media & Entertainment Sector Leader, Transaction Advisory Services

Getting convergence right

TMT companies face a multitude of tough questions when evaluating convergence options:

  1. What types of technology and content would best complement our growth strategy?
  2. Where are the best acquisition and partnership opportunities?
  3. What deals might head off disruption from below or orthogonal competition from out-of-sight?
  4. Which offer the largest and fastest revenue growth?
  5. Which lead to the best business model of the future?
  6. How can we use new data assets in disruptive revenue-generating models?

These are hard questions with few clear answers. Even after determining the optimal strategic direction, TMT companies must then choose among a wide range of inorganic growth paths to achieve their convergence goals, from traditional M&A to incubation, corporate venturing and partnerships.

Divesting to grow

With advancing technology constantly making new things possible, company building is no longer a straight-line pursuit.

The same innovation driving TMT M&A and partnering virtually guarantees that TMT company business strategy will continue to change. Companies must continue to evaluate their portfolios to determine which assets will be accretive to their future ambitions and which will not.

Recent EY research reinforced this idea, finding that fast-growing TMT companies performed capital budgeting processes more often, compared with both slow-growing TMT companies and fast-growing non-TMT companies.

In short, in the era of convergence and technological disruption, TMT companies need to regularly review their portfolios and be willing to take bold action based on the findings of those reviews.


Technology-enabled disruption, business model uncertainty, record-high equity markets and cross-sector convergence are in the nature of the TMT industries today. You can’t escape them.

Venture investment is seeding thousands of startups driving ongoing cycles of disruptive technologies, while private equity sponsors play an increasingly significant role in the TMT M&A landscape.

Success accrues so rapidly in the world of TMT that companies not first or second to any market risk irrelevance.

Meanwhile, the uncertainties make decision-making, especially around very large capital allocation decisions such as M&A, very challenging, indeed. What is more, TMT M&A success today sometimes means discarding the old merger integration playbook.

Driving deal value at this transformational time requires new thinking and new approaches.

But …

Does anybody think the pace of change in TMT will get slower from here?

We don’t think so. Instead, TMT companies can look to M&A and partnerships for that missing strategic link to complete an end-to-end solution, for scale through consolidation, geographic expansion, convergence deals or the key digital transformation capabilities they need.

Contact us


John Harrison

EY Global Media & Entertainment Leader
+1 212 773 6122

Axel Majert

EY Global Telecommunications Sector Leader
Transaction Advisory Services
+34 917 493 303

Will Fisher

EY Global Media & Entertainment Sector Leader
Transaction Advisory Services
+44 20 7951 0432

Clarence Mitchell

EY Global TMT Strategy Leader
Advisory Services
+1 212 773 8682

Mitch Berlin

EY Americas Operational Transaction Services Leader
Transaction Advisory Services
+1 212 773 7941

Brian Salsberg

EY Americas M&A Integration Leader
Transaction Advisory Services
+1 212 773 3462

Adrian Baschnonga

EY Global Telecommunications Lead Analyst
+44 20 7951 1724

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