Expenditure on digital and technology assets reached a new high last year of more than $258bn
Spending on digital and technology M&A has increased dramatically over the last five years, reaching a new high of $258bn in 2017 according to a new report by global law firm, Freshfields Bruckhaus Deringer LLP (‘Freshfields’). While deal volumes have remained steady, the study revealed that big businesses are now more willing than ever to pay large sums for digital and technology assets. Spending on these assets rose more than 600 per cent proportionally between 2009 and 2017. These findings signal the importance of digitization in today’s increasingly connected world and highlight the long-term potential returns that buyers expect to realise from assets such as semi-conductors, data or online platforms.
The report, which analyses the 26,744 deals announced by the S&P Global 1200 between 2009 and 2017, revealed the most digitally focussed countries. China and the Netherlands announced the most deals followed by Japan, Ireland, the US and Germany. As smaller economies, it is interesting that the Netherlands and Ireland are in the top five, although their figures are bolstered by the fact that many of their ‘national’ businesses are multinational holding companies attracted by the countries’ international outlook, supply of skilled workers and favourable regulatory regimes. Chinese companies were also the highest spenders ($1.47bn per acquisition) followed by companies from the US ($1.26bn).
The study also revealed the most valuable digital economies around the world. Unsurprisingly US businesses are the most sought-after by the S&P 1200 (46 per cent of activity, 71 per cent of value). A less predictable finding was that the UK ranked third in terms of volume of deals behind Japan, and in terms of deal value, the average UK digital or technology asset was acquired for more than $1bn, making it the only country other than the US to exceed this milestone.
Software was the most popular asset. A significant 39 per cent of acquisitions within digital and technology deals involved application software businesses, while the highest spending was on health tech assets ($192bn), with cognitive technologies and AI next in line. On an average deal value basis, the S&P 1200 are spending the most on the latter asset class, with each acquisition costing $2.3bn.
In addition to proving that digital and technology deals are more lucrative, the report also found that they are completed quicker than non-digital transactions. The 40 digital acquisitions valued at over $5bn for example completed an average of seven weeks faster than the comparable non-digital transactions.
Natasha Good, a partner and the global head of the technology, media and telecoms group, at Freshfields, commented on the report:
“It’s a great time right now for digital and technology M&A, with the world’s biggest companies focussing on staying competitive by enhancing their capabilities.
“Deal-making in this space could become more challenging over the next few years, as foreign investment into certain technologies is facing increased levels of scrutiny from regulators. On Freshfields’s own major M&A mandates, we have seen an increase of more than 30 per cent in deals affected by public interest or foreign investment considerations . However, our experience shows that with careful planning, businesses can still navigate this changing environment.”
About the report The full report can be found here: https://www.freshfields.com/en-gb/our-thinking/campaigns/digital/the-world-of-digital-ma/?_t_id=1B2M2Y8AsgTpgAmY7PhCfg%3d%3d&_t_q=digital+M%26A&_t_tags=language%3aen%2csiteid%3aba2121b4-3779-4fa6-8e49-49e502a9987c&_t_ip=18.104.22.168&_t_hit.id=FreshFieldsWebsite_Models_Pages_GenericPage/_b4bd25ec-b901-45a7-8a53-a4d2f1915b47_en-GB&_t_hit.pos=1