Accelerating Tech Deals in 2023
In the technology sector, dealmakers are awash in capital from private equity and flush with cash from stock sales. That’s helping them overcome some regulatory challenges in the form of competition and data security concerns. And it’s also enabling them to make bigger acquisitions at higher multiples than ever before. But despite all that, the sector’s momentum is likely to slow down in 2023 due to a combination of market volatility and slower than expected economic growth.
Even though the global economy is still largely stagnant, public companies in the tech industry have seen their share prices rise, and tech M&A activity has increased significantly since the start of the year. The first quarter of 2023 saw tech deals worth more than $155 billion, according to Refinitiv data. That’s up from just over $70 billion in the same period last year.
The first half of the year also saw several notable tech M&A transactions that involved a combination of cash and shares. It was a sign that acquirers were increasingly willing to use their highly valued shares—which are typically much less liquid than cash—to pay for the frothy premiums that many tech companies are asking. For example, identity management company Okta Inc clinched a $6.5 billion deal for rival Auth0 earlier this month with an all-stock transaction that was valued at about 26 times forward revenue.
Using your business’s technology to its full potential requires a great deal of research, testing and implementation. That’s why it’s important to do a thorough tech-based due diligence before making a deal. This step helps the acquiring company understand what technological assets and capabilities are at its disposal, which in turn allows it to accelerate its strategic goals after a merger.
However, it’s not uncommon for M&A activities to get derailed by concerns about whether a specific technology will work as intended in the target’s culture and operating environment. For example, employees may have a hard time adjusting to a new software solution or equipment if it isn’t intuitive or easy to use. That could lead to poor adoption rates, and eventually, lower productivity and profitability levels.
Fortunately, it’s possible to mitigate the risk of this kind of resistance to change by offering training and support to your employees before you invest in new technologies. You can also allay fears by showing employees how new technology can help them perform their jobs more efficiently. And if your employees do experience resistance, you can try to address it by conducting demonstrations and workshops to show them how technology can help them excel at their jobs. By doing this, you’ll help them see the value in investing in their own professional development and embracing technology-powered processes that will help them advance in the workplace. This way, you’ll be able to create a more effective, productive work environment for your team.