2021 shaping up to be record year for global tech industry M&A
Drake Star Partners, a global tech investment bank, announced today that global tech M&A transactions soared during H1 of 2021.
As the business world began to recover from the Covid-19 pandemic, global tech M&A activity registered record aggregate deal value of $303.0bn with 871 transactions in Q1 2021, according to a report by KPMG.
This is a major departure from what has traditionally happened during economic crises and shocks, which typically lead to a decline in the value of M&A transactions.
“The tech M&A market actually recovered faster than the global economy,” said Marc Deschamps, managing partner and executive chairman of Drake Star Partners. “This increase is due to multiple factors such as the record high buyout and PE funds dry powder accumulated with all those years of monetary easing and strong economic performance. Funds have increasing appetite for more and larger transactions increasing(augmenting) bidding competitiveness and pushing up values.”
He added, “The PE tech expertise is strongly up as well with funds today being quite competitive versus the corporates on strategic acquisitions. As well as the influence of Big tech in public markets – 4 out of 5 trillion dollar market cap companies are in tech- and an increasing reliance in technology for all companies and our society.”
There has been an increase of 24% in the global technology, media and telecommunications sector M&A transaction volumes, with 2,230 deals completed this first half of 2021 versus the 1,799 completed in H1 2020, according to data from PitchBook.
Similar to the wider industry, Drake Star has continued to grow during the first half of 2021. With 28 transactions completed in H1 2021, the volume of transactions is 86% higher than it was in H1 2020, which was already a record year for the firm.
“Our focus on tech and our global footprint have been the key factors of our success, with the first half of 2021 exceeding all of our expectations and with positive indications that transactions throughout the tech ecosystem will continue at a robust pace,” said Gregory Bedrosian, managing partner & CEO of Drake Star. “We continue to see strong interest in tech M&A from both strategic corporates looking to broaden and deepen their capabilities and reach as well as from the private equity funds seeking to finance and grow tech leaders of the future.”
Outlook for the remainder of 2021
According to Bloomberg, while there has been a huge increase in investment bank deals in 2021, they are concerned whether this will make up for the expected “28% drop in combined trading revenue at the five biggest U.S. banks.” Will the top U.S. banks struggle to balance M&A workload which accounts for lower revenue versus other areas of business? This insight could lead to the continued rise of boutiques and specialist Tech Investment Banks. M&A deals are at the core of their capabilities and are in a rapidly growing industry spurred on by global events.
Covid-19 acted as a catalyst for multiple technology trends that already existed before the outbreak. These trends accelerated during the pandemic and may well start as part of the “new normal”.