Deal activity in the 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.

This is according to our Global Transactions Forecast, which suggests global M&A values will rise to USD 468 billion, up 60% from USD 295 billion in 2017, and global IPO values will double to USD 45.5 billion, up from USD 22 billion.

"Many companies are sitting on significant cash piles," said M&A partner Charles Whitefoord. "Technology companies are coming under pressure to either deploy that money or return it to shareholders."

Although global deal activity slowed across all sectors in 2017, we anticipate a notable rise in the coming year amid easing policy concerns in the US and EU, reasonable GDP growth across regions, and accommodative fiscal policy.

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. In fact, the technology and telecommunications industry is expected to drive the global rebound in IPO activity in 2018, aided by the Chinese government’s efforts to spur technology firms to go public.

Tech M&A in 2018: Key drivers

In 2018 we forecast M&A activity in the tech and telecom sector to rise significantly across all regions. North America will top the list with transactions totaling USD 243 billion, followed by Asia Pacific with USD 108.3 billion, Europe with USD 106 billion, Africa and the Middle East with USD 5.9 billion, and Latin America with USD 4.9 billion.

Tech IPOs in 2018: Key drivers

A number of factors are driving our forecast for a surge in tech and telecom IPO activity in 2018, as the levers all point in the right direction for continued expansion and capital formation. The stock market is providing good valuations, the price of debt is rising, and economies are growing.

Beyond 2018

Following a peak in deal activity in 2018, we forecast that tech and telecom M&A and IPO transactions will decline in 2019 in line with a larger, worldwide trend of cooling deal activity in developed markets. As interest rates rise, global trade and investment growth slows, and equity prices correct, we forecast tech and telecom M&A to drop to USD 394 billion in 2019, and further to USD 328 billion in 2020. After reaching its highest level since 2014 at USD 45.5 billion in 2018, we forecast that IPOs in the sector will decrease to USD 40.5 in 2019 before dropping to USD 24.3 in 2020.