As pandemic volatility subsides, competition for acquisition targets will continue to increase, they say.
This week Gartner released its report entitled Tech CEO: Acquisition Strategies During COVID-19 and Implications for Providers. The study predicts that there will be more global M&A activity involving technology providers in 2022 than even in 2018.
Acquisitions of tech providers were briefly impacted in 2020 by the onset of the pandemic, they say. But M&A activity quickly rebounded into 2021 as the economy began to recover. “Market conditions for deal making will continue to improve as volatility stemming from COVID-19 subsides,” said Max Azaham, senior research director at Gartner. “Tech CEOs pursuing acquisitions should anticipate increased competition for targets and take steps to gain advantages over other acquirers to earn seller acceptance.”
Acquisition activity was most adversely impacted during the second quarter of 2020, according to Gartner. They also say that activity in the fourth quarter was higher than in the last two years. Acquisitions of communications providers led the rebound in the second half of 2020. Number two were the acquisitions of services and software companies.
Financial acquisition hawks are especially keen on software providers
Acquisitions of technology providers are met with increasing interest among financial services companies, Gartner says. Private equity firms are especially keen, they note.
Financial acquisitions of software providers represented over half of all such acquisitions in 2020. Despite software already being the largest category, the attention of financial acquirers should drive higher activity in 2021, Gartner says. The largest M&A activity gains in the second half of 2020 involved financial acquisition of communications providers (93% growth).
CIO customers of vendors undergoing an integration expect minimal service disruptions and transparent communications on product, pricing and support changes, if any. “Without empathy and a deep understanding of what motivates the existing customer base, organizations risk acquiring a customer base that will churn following deal closure,” said Mr. Azaham.