Cybersecurity is expected to be the biggest challenge and opportunity facing technology, media, and telecommunication (TMT) mergers and acquisitions professionals (M&A) in 2022, according to new research by Datasite, which surveyed 200 senior UK M&A professionals.
The survey found that 54% of UK CEOs and 46% of senior M&A professionals said that cybersecurity presents the best opportunity for TMT dealmaking this year, ahead of cloud technology and data analytics, of which 44% said were the next best targets.
However, CEOs said cybersecurity is also one of the most difficult areas to manage in executing deals and integrating assets, post-acquisition. In fact, more than a third (37%) of CEOs believe cybersecurity and the ability of staff to work in a virtual environment were the biggest challenges when executing TMT deals virtually, followed by regulatory approvals (17%).
Market forces at work: Interest and activity rising
Merlin Piscitelli, Chief Revenue Officer for EMEA at Datasite said, “The TMT M&A boom is the result of several market forces. The pandemic has accelerated digital transformation strategies, increasing the digital footprint of mid- and large-cap companies. In fact, we are seeing this in real time, with new UK TMT projects on our platform up 39% at the end of 2021 compared to 2020. And because these are deals at their inception rather than announced, this means there are already many TMT deals already in flight.”
Piscitelli continued: “Additionally, as technology is increasingly facilitating flexible working arrangements, the risk of a cyber compromise is now higher, so interest in cybersecurity investment makes absolute sense. Of course, with increased levels of activity expected, it’s more important than ever to have secure, effective tools that help manage the M&A and integration processes. Attention to and investment in cybersecurity will also ensure valuation protection in the face of growing buyer scrutiny.”
Rough seas ahead? Navigate with technology
But it’s not expected to be completely smooth sailing. Outside forces can’t be ignored nor expected not o have an impact on M&A. Over one-third of UK senior M&A professionals (36%) expect slow economic recovery to hinder TMT M&A activity, a sentiment reflected by over half (54%) of CEOs. M&A professionals also said supply chain issues (31%) and overvaluations could be deal-making impediments (29%). However, tools and technology can help dealmakers be more equipped to navigate the rough seas, so to speak.
“There are some risks associated with a stricter regulatory and foreign direct investment environment this year, which dealmakers will have to consider carefully,” said Piscitelli. “To capitalize on attractive opportunities, it will be important for dealmakers to use technology and tools that help them keep track of deal execution timetables and regulatory compliance risks. In this environment it becomes even more crucial to get the due diligence phase of a technology M&A deal done right, including getting it done efficiently and effectively.”
Datasite is a leading SaaS provider for the M&A industry, empowering dealmakers around the world with the tools they need to succeed across the entire deal lifecycle. For more information, visit www.datasite.com.