Subscribe
  • Home
  • /
  • Channel
  • /
  • MEA telecom, tech acquisitions to quadruple

MEA telecom, tech acquisitions to quadruple

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 20 Mar 2018
M&A deal activity in the MEA technology and telecommunications sector is likely to accelerate, driven by the expansion of technology across industries.
M&A deal activity in the MEA technology and telecommunications sector is likely to accelerate, driven by the expansion of technology across industries.

Mergers and acquisitions (M&A) activity in the technology and telecommunications sectors in Africa and the Middle East (MEA) will more than quadruple this year, reaching US$5.9 billion.

This is according to Baker McKenzie's Global Transaction Forecast report, conducted in association with Oxford Economics.

The report shows that M&A deal activity in the MEA technology and telecommunications sector is likely to accelerate in 2018, driven by a more positive global economic outlook, the expansion of technology across industries, investment from emerging markets, and strong corporate balance sheets.

"The tech and telecoms sector in Africa and the Middle East was valued at $1.2 billion in 2017, and is predicted to increase to $5.9 billion in 2018 and indicate a further $5.9 billion in 2019, before decreasing to $3.9 billion in 2020. Global M&A values will rise to USD 468 billion, up 60% from USD 295 billion in 2017. Several trends of embedding new technology across sectors, plus activist investment in technology firms by emerging markets such as China and Saudi Arabia, suggest strong deal activity in 2018," notes the report.

Matthew Gemello, an M&A partner at Baker McKenzie, explains: "Tech and telecom M&A activity according to the report, in both Africa and the Middle East and Latin America will more than quadruple in 2018, driven by anticipated deal activity in the rapid growth of innovation in artificial intelligence, cloud computing, cyber security, and big data."

The expansion of emerging technologies across industries, including foodtech, fintech, and autotech, will also drive M&A activity as we expect to see more cross-sector deals involving technology in the next few years, notes Baker McKenzie.

"Top talent continues to be an important driver in technology acquisitions, we are seeing

fewer pure 'acqui-hires' as compared to prior periods in the last 10 years, but the overarching need remains paramount from a competitive perspective," Gemello adds.

One of the clearest market dynamics driving transactions, adds the report, is that businesses focused on the use of customer data need to increase the scope of their customer reach, and are seeking to achieve this by acquiring competitors and new technologies that will attract more customer engagement.

"Hybrid sectors represent the growing convergence of traditional industries and technology as companies battle to remain competitive," says Anne-Marie Allgrove, global chair of Baker McKenzie's Global TMT Industry Group based in Sydney. "When you couple the rapid pace of innovation and continued push for vertical integration, it creates a recipe for increased M&A activity."

According to the Deloitte M&A trends report, technology acquisition is the new No. 1 driver of M&A pursuits globally, ahead of expanding customer bases in existing markets, or adding to products or services.

"Talent acquisition continues to trend upward as a motivation for M&A strategies. Around 12% of 1 000 respondents cite digital strategy as the driving force behind M&A deals for 2018; combined, acquiring technology or a digital strategy accounted for about a third of all deals being pursued.

"Corporate executives and private equity investors from the largest firms - with revenues and

investments in excess of $1 billion - are considerably more confident than their smaller counterparts that they will engage in bigger deals this year."

Shabbir Norath; head of advisory at Nedbank CIB, says the rapid transformation of the financial services landscape has been a driving force in the recent digital evolution of traditional banks, resulting in many fintech acquisitions globally.

"The transformation of the financial services landscape has resulted in a flurry of global activity around the acquisition of promising new fintech companies that could enable large traditional players to effectively leapfrog the competition in the innovation game. Examples of this include JP Morgan's recent acquisition of payments startup, WePay, for an estimated $220m, BNP Paribas' investment in 'robo-adviser' Gambit Financial Solutions and, closer to home, KPMG's purchase of the leading global FinTech matching platform, Matchi."

In South Africa, however, he adds that while big M&A deals aren't yet a primary driver of fintech growth, our financial institutions most definitely recognise the massive investment return potential they offer.

Share