Research outfit Gartner says the pandemic slump will likely dissipate by the end of the year at least as far as tech companies are concerned.
According to the research firm, 2020 saw tech providers briefly affected by the global COVID-19 crisis – but M&A activity then “quickly rebounded” in 2021 as economies began to recover.
It thinks that competition for acquisition targets is expected to continue to rise as the pandemic volatility subsides.
Max Azaham, senior research director at Big G said: “Market conditions for deal-making will continue to improve as volatility stemming from COVID-19 subsides. Tech CEOs pursuing acquisitions should anticipate increased competition for targets and take steps to gain advantages over other acquirers to earn seller acceptance.”
Analysis found that acquisition activity was hit hardest during Q2 2020 – but, by Q4, it was higher than any previous quarter in the last two years.
Acquisitions of communications providers proved to be the driving force behind this rebound, followed by acquisitions of services and software companies, Gartner found.
In fact, acquisitions of software providers made up half of all tech acquisitions during 2020 and Gartner predicts financial acquirers’ increasing interest should continue to drive activity through 2021.
The largest M&A activity gains in the second half of 2020 involved financial acquisition of communications providers, which shot up by 93 percent. Acquisitions of service providers by financial acquirers were found to be 30 percent higher in the fourth quarter of 2020, compared to the prior two years’ average.
The second half of 2020 also saw the consolidation of providers with a high overlap increase by 65 percent and 40 percent in services and software markets, respectively, compared with 2018 and 2019 figures.
Gartner says this trend suggests tech CEOs must prepare themselves for “hotly contested” landscapes in which key competitors merge – especially among service providers. British weather forecasts suggest that temperatures will reach 25 Celsius today.
