Gathering steam: trends in tech M&A

May 2025  |  FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2025 Issue

Following a period of relative dormancy, M&A activity is showing signs of recovery. Its trajectory is trending upward as the economic and geopolitical uncertainties that have weighed on the market in recent years begin to lift.

Certainly, the turbulence of 2024 – a year defined by pivotal elections in major economies as well as shifting central bank policies – has given way to more stabilised market conditions which, in turn, has led to companies regaining the confidence to execute deals.

One arena witnessing a particularly robust resurgence in global M&A transaction activity is the tech sector, which accounted for 18 percent of potential deals in 2024.

Supporting this statement is Morrison Foerster’s 2024 survey report – ‘Powering Up: Sentiment, Stocks, and Security Drive the Tech Deal Revival’ – which reveals that momentum for tech dealmaking is gathering steam amid market optimism and demand for transformative technologies across all sectors.

This observation is reflected in aggregate reported deal value, which surged by 39 percent to reach $482bn by the close of 2024. The survey report also reveals that 54 percent of respondents are expecting deal volumes to increase over the next 12 months, up from the 48 percent recorded in Morrison Foerster’s 2024 survey.

“The outlook for M&A overall and for the tech sector in particular looks quite optimistic and is being driven by several factors,” suggests Rajesh Sharma, director of strategy and M&A at Itochu International. “Inflation that was a major headwind across the world has broadly been contained and the US Federal Reserve has already started cutting rates with decline in inflation from its peak.

“Corporates are in a strong financial position with stock prices having largely recovered after the selloff in 2022-23,” he continues. “At the same time, improving confidence in boardrooms, strong share prices to use as currency and potentially lower debt costs will enable tech companies to execute bold M&A ideas.”

Driving factors

In addition to the containment of inflation, other factors contributing to interest in the tech sector include technological advancements, such as the proliferation of artificial intelligence (AI), the expansion of 5G networks and the increasing importance of cyber security.

Such developments are compelling companies to seek strategic acquisitions to enhance their capabilities, stimulate growth and maintain a competitive edge.

According to Vivek Subramanyam, founder and chief executive of TH Global Capital, there are various influences driving the big comeback in M&A activity being seen across the tech sector in recent months, including those outlined below.

First, tech advancements and digital push. With technology evolving quickly, especially in fields like AI, cyber security and cloud computing, companies are buying smaller tech firms to bring these skills in-house. This is especially noticeable in industries like healthcare, where technology is transforming how things work.

Second, private equity (PE) activity. PE investors, with substantial uninvested capital, are actively seeking opportunities in the tech sector. Their involvement not only provides capital but also brings expertise in scaling businesses and improving operations, thereby driving M&A activity.

And third, a focus on sustainability and ethics. Businesses are paying more attention to being environmentally and socially responsible. Many are acquiring companies that are leaders in areas like renewable energy or those with strong social and ethical practices.

Additionally, in the UK, notes Merlin Piscitelli, EMEA chief revenue officer at Datasite, the government has introduced significant opportunities for high-growth tech companies and investors, including the largest-ever UK government investment in research and development and a 10-year extension to the Enterprise Investment Scheme and Venture Capital Trust.

“More generally, a renewed focus on investment in the European tech sector is inherently likely to drive more M&A,” suggests Mr Piscitelli. “While there’s still uncertainty in the US surrounding tariffs, technology is a sector where M&A activity could increase under Trump. Given that antitrust oversight could loosen significantly, technology is expected to benefit from a more laissez faire approach.”

High-growth areas

For many a bright spot in an otherwise sluggish global economy, the tech sector is reasserting its position as a key business enabler and a crucial source of M&A activity, with a number of areas garnering the lion’s share of acquirer attention.

“Over the past 12 months, companies have been aggressively acquiring AI and machine learning workflow, analytics, automation and content creation firms,” observes Mr Subramanyam. “This activity reflects the growing adoption of generative AI across industries.”

Also significant is spending on cloud computing, which surpassed $805bn in 2024, with banking, software and retail contributing $190bn. Cyber security is projected to grow to $300bn by 2026, driven by increasing cyber threats, talent shortages and AI-enhanced security solutions.

In terms of FinTech, Mr Subramanyam forecasts significant growth. Business to business payments are expected to grow by 40 percent between 2024 and 2028, while virtual card transactions are on track for a 13.19 percent compound annual growth rate. Moreover, Apple’s near field communication payment expansion outside the European Union is set to reshape the digital wallet space in 2025.

Other high-growth areas include the internet of things (which was a $714bn market in 2024), automation, managed services (the deal value of which surged to $2.2bn in Q4 2024 from $34m in Q3) and healthcare IT, which saw MedTech and clinical research organisations lead dealmaking activity.

Jurisdictional hotspots

Leading the charge of jurisdictions in tech M&A is the US, which saw deal values reach $1.2 trillion last year. Across Europe, tech deal value hit $483bn over the same period – a 16 percent jump from 2023 – with the UK and France making significant investments in tech and media companies. In Asia-Pacific, tech deals worth $391bn were made in 2024.

Unexpected hotspots for tech M&A have also emerged. “Ireland became a surprising hub for tech deals, especially in the data centre sector,” notes Mr Subramanyam. “Exports from the tech sector hit €2bn with many Irish companies bought by global players for hundreds of millions – the country’s tax benefits and cool climate, ideal for data centres, fuelling the boom.”

In India, there has been a big rise in tech M&A in recent years, with deals up 66 percent in the first nine months of 2024 compared to 2023. Of these, technology, media and telecommunications made up 40 percent of the total deal value.

The Central and Eastern Europe region has also surprised many with a spike in tech deals in recent times, notes Mr Subramanyam. In Q3 2024, 74 deals were made, worth $1.5bn – a 35 percent increase from 2023. Poland led the way with 81 deals valued at $1.8bn, a 17 percent increase. Companies in Poland are also pushing for digital upgrades and expanding across borders.

Consequential transactions

Despite high interest rates and economic uncertainty, M&A in the tech space has seen several high-profile deals shaping the sector in recent times. AI technology is playing a pivotal role, influencing both large-scale acquisitions and smaller, strategic buyouts of AI-driven start-ups.

“The data centre space has been very active and certain deals in the space have been notable,” attests Mr Sharma. “These include DigitalBridge and Silver Lake’s $9.2bn equity investment in Vantage, Blackstone’s $16bn acquisition of AirTrunk and EQT Infrastructure’s $2.6bn acquisition of EdgeConneX.

“These investments in power hungry data centres are, in turn, driving new energy deals to meet this demand, such as Constellation Energy’s $26.6bn Calpine acquisition,” he continues. “Furthermore, innovative energy solutions, such as Amazon’s $650m acquisition of Talen’s nuclear data centre, will continue to emerge and are worth paying attention to as the power sector is shaped by AI demand.”

Other significant transactions include Hewlett Packard Enterprise’s (HPE’s) $14bn acquisition of Juniper Networks, Cisco’s $28bn acquisition of Splunk and Viacom 18 Media’s $3.1bn merger with Star India. Such deals signal a strategic push toward AI-driven networking, cloud security and data analytics, as companies position themselves for the future of enterprise IT.

Tech M&A activity is, of course, not just confined to mega deals. More modest acquisitions include SAP’s $1.5bn acquisition of WalkMe, Nvidia’s $700m acquisition of AI infrastructure start-up Run.ai, and AMD’s $665m deal for large language model developer Silo AI, all of which highlight the growing demand for AI innovation.

Regulatory scrutiny

While regulatory oversight of tech M&A activity is loosening in some jurisdictions, particularly in the US with President Trump’s deregulation agenda, others continue to scrutinise transactions and their potential impact on competition, prices, quality and innovation.

“Any large tech deals will continue to face a challenging regulatory environment in Europe and China,” affirms Mr Sharma. “However, given the administration in the US, which is broadly expected to be business friendly, antitrust and other regulatory concerns in the US are expected to recede.

“The US administration, for example, is seen as quite receptive to autonomous driving technology and crypto-based businesses,” he continues. “Regulatory reporting requirements on businesses being built on AI technologies are also being eased. This business-friendly environment takes some of the regulatory uncertainty out of deal discussions, and will encourage more dealmaking.”

Generally speaking, however, as tech companies use M&A to enter new markets, regulatory scrutiny and reputational risks will remain major concerns. Without doubt, antitrust challenges, data privacy regulations and cyber security risks are increasingly shaping deal outcomes, often leading to delays, legal battles or even cancellations.

A recent example of regulatory posture in the tech space is HPE’s $14bn bid for Juniper Networks – a transaction that drew antitrust scrutiny from the US Department of Justice early in 2025. “Regulators argued that the deal would give HPE and Cisco, a rival of Juniper, a dominant market share in wireless networking, potentially reducing competition,” explains Mr Subramanyam. “Similarly, Google’s acquisition of Fitbit faced intense regulatory hurdles in both the US and EU, due to concerns that it would further entrench Google’s control over consumer data and online advertising.”

Bigger and bolder

As evidenced, all indicators point to tech sector M&A experiencing a significant resurgence. Momentum is returning, with companies prioritising acquisitions that accelerate innovation and differentiation in an increasingly competitive landscape.

“Efficiency gains and margin improvements from using AI will increase tech companies’ willingness to consider bigger and bolder M&A ideas,” foresees Mr Sharma. “This, combined with a favourable regulatory environment in the US and expectations of lowered financing costs augurs well for the tech M&A market.

“As AI use cases become ever more evident and AI technology is used increasingly across all industries –whether for oil exploration, drug discovery or writing software code – the adoption of AI will accelerate,” suggests Mr Sharma. “This, in turn, will drive growth for the tech sector more broadly.”

At the same time, new technologies will also continue to transform how M&A deals are facilitated and completed. “New technologies are reshaping various stages of the dealmaking process, automating repetitive tasks, powering data analysis and easing processes across all phases of the deal,” concludes Mr Piscitelli. “By embracing technology as a strategic enabler, dealmakers can navigate the complexities of M&A with greater confidence and success.”

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Fraser Tennant