Acquisition International - Issue 3 2022 5 LONDON – 28 February 2022 – 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. The SaaS-based technology provider for global dealmakers surveyed 200 senior UK M&A professionals comprised of CEOs to corporate development, banking, consulting, accounting, private equity and legal professionals. More than half of UK CEOs (54%) and 46% of senior M&A professionals surveyed said that cybersecurity presents the best opportunity for TMT dealmaking over the next year, ahead of other subsectors, such as cloud technology and data analytics, of which 44% said were the next best targets. Yet at the same time, CEOs said cybersecurity is also one of the most difficult areas to manage when it comes to executing deals and integrating assets, post-acquisition. 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%). One in three (33%) of CEOs also said implementing technology into their existing operations is the biggest challenge when managing the integration phase of a TMT deal in a purely virtual environment. This was ahead of operating models (29%) and communicating strategy to employees (29%). 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 largecap 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. 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.” Still, not everyone involved in the M&A ecosystem agrees on cybersecurity being the most attractive subsector. While respondents from UK law firms (49%) and investment banks (46%) agree cybersecurity presents the best TMT dealmaking opportunities this year, corporates overwhelmingly (64%) picked cloud tech, while 57% in consulting and accounting Cybersecurity Is Top TMT M&A Investment Opportunity and Challenge for UK CEOs, Dealmakers: Datasite Survey firms selected data analytics and 47% in private equity (PE) firms chose e-commerce as the most attractive subsectors. TMT dealmaking won’t be all smooth sailing M&A professionals also said several factors could interfere with TMT dealmaking this year. 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%). Datasite’s Piscitelli said, “There are some risks associated with a stricter regulatory and foreign direct investment environment this year, which dealmakers will have to consider carefully. 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.” Additional key findings from the survey include: • When it come to the most important factor in a TMT target, most senior M&A professionals favor profitability (45%) and growth (44%), while more than half of CEOs (54%) prefer valuations. • 44% of senior M&A professionals expect deal activity to be led by mergers (49%) and SPACs (44%), ahead of IPOs (39%), with most activity taking place domestically. • 73% of senior M&A professionals are concerned that increased scrutiny around national security issues and changing tax and privacy regulations will prevent some deals from happening this year. • Regulations slowed deal activity in 2021, according to 49% of senior M&A professionals. To learn more about Datasite, please visit: www.datasite.com
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