Technology could save distressed M&A deals, even with fewer deals and higher costs?
The distressed M&A market is changing fast, with technology, media, and telecom leading the charge. In 2022, distressed asset deals globally went up by 20%, pointing to a big change. Yet, the UK’s total M&A deals dropped by 18% in 2023, technology still stands out.
Technology plays a vital role in staying ahead in M&A. Even with tough economic times, the TMT sector in the UK shows how crucial tech is. This shows that even as debt costs rise, tech M&A remains strong.
Buying AI and tech companies is a big trend, showing a move towards digital improvements. In 2023, most M&A deals in the TMT sector were tech-related, especially software. This highlights technology’s key role in the distressed M&A scenario.
In the future, private equity might rule the UK’s M&A world by 2024. With a lot of money looking for places to invest, tech deals will likely grow. This increase in tech-based M&A could include artificial intelligence, the Internet of Things, and cybersecurity.
Such a digital push is vital for competitive edge in the distressed M&A market. Despite fewer TMT deals in 2023, compared to 2022, technology’s importance keeps growing.
The Role of Digital Solutions in Distressed M&A
Digital solutions are changing the game in distressed M&A. They bring fresh methods and strategic thinking. With financing costs rising, the focus has moved to smaller deals. In the UK, buyers look to tech for solutions, especially in retail, manufacturing, and transportation. Take the retail world; it’s ripe for a digital makeover after e-commerce disruptions.
Legal rules play a big part in UK deals, like those from the Competition and Markets Authority. Also, worries about national security under the NSI Act. Companies are working harder to stand out to lenders and are facing more restructurings or loans. This pushes the need for better strategies and tech use deeper.
But, buying in a rush can lead to big risks. However, digital tools make it easier to check and join new assets. Businesses are more and more looking to tech to stay in the game. This trend affects many areas, from health to finance, where buying opportunities are growing.
With markets quickly changing, distressed companies need digital more than ever. For example, areas like dining or shipping must use tech to lower risks. This includes dealing with pension debts and keeping a good public image.
As the world economy faces challenges like soaring energy costs, digital is key for success. It helps companies do better in the long run. By using digital smartly, they can come out stronger from these tough times.
UK Technology and Its Influence on M&A Transactions
UK technology has become key in M&A deals, making big changes and creating a strong market. In 2022, the UK saw a 20% increase in troubled assets. This shows how important tech strategies are in tough market times. Deals focusing on AI, IoT, and cybersecurity are still going up, even with less deals overall.
After Brexit, there’s a predicted increase in M&A activity. This has put the UK tech world in the spotlight for global buyers. The US is especially interested, thanks to good exchange rates. Plus, UK businesses are focusing more on ESG issues, which is changing how deals are done and investments are chosen.
PE firms are big players in the UK’s deals, putting more money into growing tech. With a focus on AI and machine learning, the UK is making due diligence better. This speeds up the time it takes to close a deal. Software makes up most of the tech deals, showing its central role.
Blockchain is making deals more open and safe, and VDRs are helping with remote deal discussions. This makes it easier for more people to invest from all over the world. The UK’s push for more digital and tech use is making it a top spot for M&A deals. With lots of new companies and smart tech, the UK is shaping the future of deal-making with its tech-first approach.
The Impact of Artificial Intelligence on Deal-Making
Artificial intelligence is changing the game in M&A deals, bringing efficiency and new ideas to many fields. The UK, in particular, is seeing big changes thanks to AI, especially in tech-focused deals. Companies are eager to buy AI-focused businesses to stay ahead. AI tools are making due diligence better by checking documents, finding important points, and spotting potential risks. This makes the deal process smoother and more complete.
Generative AI is proving handy in creating first drafts of due diligence reports. This makes a big part of M&A deals easier. We see a lot of AI-focused deals happening, especially in the software area where machine learning is a hot topic. These deals improve the buyer’s tech abilities and pave the way for more growth and changes.
Healthcare deals are picking up, partly because of AI. It’s not just improving the business side of things but also making strides in cybersecurity and IoT. This helps drive tech-heavy strategies in M&A. With private equity firms favouring companies that care about the planet, there’s a big push for AI that’s good for the environment. This trend is shaping the future of deal-making in the UK.
Tech-Driven Strategies in the Distressed M&A Market and Technology Impact on Distressed M&A UK
In the UK, tech-driven strategies are changing the way we look at distressed M&A deals. They highlight how important technology is for staying competitive. The use of technology in this area has increased distressed M&A opportunities by 20% in 2022. For example, the purchase of Splunk by Cisco Systems shows how crucial tech is for business success.
AI and machine learning are making due diligence faster, more efficient, and accurate. This is especially true in operational technology integration. It proves that technology is key in important business deals.
The shift to Virtual Deal Rooms for making deals remotely also shows the technology impact on distressed M&A UK. Even with an 18% decrease in overall M&A deals in 2024, the UK still offers good deals. Technologies like blockchain are making deals more transparent and efficient. This is making tech strategies even more important in the business world.
Private equity is becoming more important, often focusing on growth capital and special areas like health. This is seen in higher deal numbers in the health sector than in 2022.
After Brexit, more M&A activities are expected in the UK. Big deals like Microsoft’s buyout of Activision Blizzard for USD68.7 billion show how important tech is in these deals. The UK is also leading in sustainable deals, with a focus on ESG by private equity firms.
The tech sector was tough in 2023 but is expected to grow again in 2024. This is due to strategies driven by technology, like operational technology integration. They make the tech industry strong in leading future M&A activities.
Impact of Cyber Security on Distressed M&A
Cyber security is now key in the distressed M&A world, really changing how deals are done. In 2023, the TMT sector saw a big drop in deals globally. The Americas had a 51.9% less deal value. Still, there were strong investments in cyber security shown by buying companies focused on security analytics.
Dealing with online threats well is now vital for the success of hard times M&A deals. New AI tech is looking like it will be very useful, improving the way deals are made and bringing new ideas. In 2023, the amount of money put into deals hit a new high, showing just how important good cyber security is for keeping businesses going.
Around 75% of all tech deals in 2023 were about software, showing how much we depend on tech to fight off digital dangers. With threats always changing, it’s key to make sure security is in the plan from the start of building new products. This helps make tougher systems.
More and more money is being spent on new AI to keep deals safe from cyberattacks. The National Cyber Security Centre says starting with extra safe systems is a must for M&A success. These security steps not only keep a company’s things safe but also make them more appealing for deals.
The effect of cyber security on tough times M&A underlines the wider tech impact on mergers and acquisitions. It highlights how important it is to be ready in the digital world to handle the many challenges in combining companies.
Operational Technology Integration in Mergers
During mergers, blending operational technologies is key. It boosts efficiencies and ties digital systems together. This merging also focuses on merging technology platforms and gathering tech assets. It ensures smooth operations and maximises tech use for the new joint entity.
Deloitte has a strong record in successful mergers, like Deloitte Consulting in 1995 and Eclipse in 2000. Their success shows how crucial good tech is for mergers. As the world goes more digital, AI is set to boost the UK’s economy by £630bn in 2035. This shows why being efficient in M&A is so important.
By 2035, AI and machine learning could up the UK’s economic growth. It could raise the Gross Value Added rate to nearly 4%. For this boost, the UK plans to have an AI-focused master’s and more PhD spots. But, surprisingly, just 10% of fund managers use AI and machine learning. This means there’s a lot more these tools could do.
The number of global deals is going down, but the big deal sizes are going up. Especially, the energy sector tripled its big deals over a year. Plus, Cisco offered a huge US$28 billion for Splunk, the largest tech deal in the TMT sector in 2023. This shows how important it is to use Decision Support Systems well.
Having a smart plan for mergers and mixing company cultures is vital for success. It helps to blend processes, share skills, promote new ideas, and grab growth chances after merging. This underlines why it’s crucial to use tech well in M&A in the UK.
Legal Considerations and Tech Adoption in M&A
Legal matters are key in M&A deals, especially when tech is involved. In the UK, laws like the Enterprise Act and the National Security and Investment Act are crucial. They make sure tech in M&A follows the rules, keeping everyone safe and supporting wise tech use.
Global private equity deals fell by 40% in 2023, which was tough. But, deals focusing on technology stayed strong, especially in telecoms, media, and technology. In these fields, software deals made up nearly 75% of all technology deals, adding a lot to the total deal worths. Even in tough times, companies are keen on using tech for growth, with a big interest in AI and software trends.
Getting the okay from authorities is always key, especially in tricky M&A situations. It’s a must to follow the rules on technology and property rights. And these rules keep evolving, given recent hard times like the Covid-19 pandemic. So, dealing with tech in M&A calls for clear agreements, like on the sale price and conditions to meet, due to digital changes.
The tech, media, and telecom sector had its challenges in the Americas and Europe/Africa last year. The Americas saw a large drop in deal numbers and values. Yet, deals in tech, software, and AI kept attracting big investments. This was clear in Europe, where AI-focused initiatives got over $100 million in several occasions, showing tech’s lasting impact on M&A moves.
Looking to the future, we expect tighter rules on outside investments due to the pandemic’s wide financial blow. Such steps will shape the legal side of tech deals in M&A more. These laws aim to ensure companies use tech in a way that’s both legal and smart.
Conclusion
Digital changes and troubled mergers and acquisitions in the UK mark a big shift. Technology is changing how deals are done. Even with the pandemic, there have been many mergers. But now, with less government help, more deals might happen, especially in industries like retail, health, and tech.
The UK’s new law, the National Security and Investment Act 2021, makes things harder for troubled deals. This affects how plans are made and carried out. With risks like less careful checks and more laws, it’s a big task to handle.
Since 2022, more than the year before, there’s been a 20% increase in deals gone wrong. This shows the urgent need for better handling of companies in trouble. Despite there being fewer deals overall, the health sector has seen more action. This points to a growing focus on health and other strong sectors.
Private investors will still play a big role, targeting certain industries and looking at ESG issues. The part that tech plays in these changes is huge. AI, IoT, and better security help deals run smoother. They also keep businesses steady, showing how vital tech is in troubled deals in the UK.
