Mid-year update on M&A trends in Technology, Media and Telecommunications (2024)

Software remains the leading driver of M&A in the TMT sector, with deal values in the first half of 2024 on track to surpass those of 2023, despite lower deal volumes. Notably, Synopsys’s proposed US$32.5bn acquisition of Ansys was the second largest deal globally across all sectors. Six software megadeals (deals worth more than US$5bn) were announced in the first half of 2024, up from four in 2023. While private equity’s share of software deal volume has remained quite stable, its share of deal value has decreased significantly, from 83% in the second half of 2023 to 59% in the first half of 2024, well below the past five-year average. Cybersecurity, particularly through software-as-a-service (SaaS) offerings, continues to be a key area of interest, highlighted by major deals such as Cisco’s US$28bn acquisition of Splunk and Thoma Bravo’s proposed US$5.3bn acquisition of Darktrace. Palo Alto Networks recently announced its acquisition of IBM’s SaaS offering, QRadar, signalling the potential for further consolidation in the industry as companies strive to provide end-to-end security operations platforms.

We expect other TMT M&A hotspots to emerge in the second half of 2024. Corporate dealmaking in the software sector is picking up, with deal values rising as companies refocus on growth strategies after a period of internal consolidation. In the telecom sector, companies are undergoing significant transformations to ensure future economic viability, as seen in transactions such as the Sprint and T-Mobile merger and BT Group’s spin-off of BT Sports into a joint venture with Warner Bros. Discovery. These moves reflect a broader trend towards more focused and streamlined business models. In addition, advertising is poised to become a US$1tr category by 2027, driven by targeted strategies from tech giants such as Apple and Netflix. We expect this growth to fuel M&A activity, particularly in ad tech vendors and digital marketing agencies, as entertainment companies compete for a larger share of consumer spending.

M&A in global tech, media, and telcos Key themes driving TMT M&A in the second half of 2024

Pent-up demand: Easing recession fears, stabilised inflation, and large capital reserves set the stage for growth in TMT M&A over the next 6-12 months. The first half of 2024 saw a resurgence in large deals, particularly in software, with corporates leading the way. Private equity may regain M&A share in the second half as funds face pressure to deploy and return capital, potentially increasing deal activity through to early 2025.

Resurgence of the IPO market: The IPO market is showing signs of recovery in 2024, driven by strong equity market performance. Despite a slow start in the first quarter, with a decline in the number of IPOs, global proceeds increased, indicating a shift towards larger IPOs. The TMT sector led this trend with significant offerings such as Reddit’s US$860m IPO. While some large IPOs may be delayed until 2025 due to economic and regulatory factors, the market is expected to pick up momentum.

Global M&A trends in tech, media, and telecoms Technology sector

The return of megadeals: With greater economic stability and more confidence in valuations, CEOs are focusing on executing strategic plans. Combined with pent-up demand, this is leading to a rebound in tech M&A. The year started strongly with Hewlett Packard Enterprise’s proposed US$14bn acquisition of Juniper Networks, one of eight megadeals announced so far in 2024, well ahead of 2023. The market is watching closely to see if this trend continues.

AI investment over acquisitions: Despite the hype around AI, there hasn’t been a significant volume of AI-related M&A activity. Instead, major players such as Google, Meta, Microsoft, and Amazon are investing heavily in AI infrastructure, with a combined capital expenditure of US$200bn in 2024. This means we expect few high-profile AI deals this year but a continued focus on building AI capabilities.

IT services M&A slowdown: The IT services sector, with its sensitivity to economic cycles, has seen stable but low levels of M&A activity due to ongoing economic uncertainty, high interest rates, and cost concerns. As a result, many potential buyers are postponing or cancelling projects, leading to depressed valuations and reduced investor interest.

Muted semiconductor deal activity: We expect semiconductor M&A activity to remain subdued due to regulatory scrutiny, a focus on onshore investment, and supply chain resilience and profitability. Demand for generative AI has boosted chipmakers’ financial results, but the sector is channelling funds into production investment rather than acquisitions, although some deals, such as Nvidia's acquisition of Run:ai, may still occur.

Global M&A trends in tech, media, and telecoms Entertainment and media

The entertainment and media industry is undergoing rapid change, driven by technological advances. This is creating strategic M&A opportunities as companies adapt to new consumer preferences and regulatory challenges. To navigate this dynamic landscape, firms are increasingly focusing on their core businesses. The first half of 2024 saw a resurgence of corporate megadeals in media and entertainment, a trend we expect to continue in the coming months as companies restructure their portfolios.

Restructuring and distressed assets: Companies are moving away from traditional models and are now prioritising capital optimisation to drive future growth. The ongoing streaming wars, high demand for cross-platform content, and personalised media as well as live event experiences are likely to drive dealmaking in the second half of the year.

Focus on India: India’s expanding entertainment market is attracting increased interest from dealmakers, driven by its large consumer base and rising spending. Significant deals such as Disney’s US$8.5bn merger with Reliance and WWE’s US$5bn deal with Netflix illustrate the role of M&A in reshaping India’s media landscape, capturing new audiences and capitalising on emerging trends.

Global M&A trends in tech, media, and telecoms Telecommunications

As we stated in our outlook at the beginning of the year, we expect telecoms to continue to focus on core strategies such as delayering, in-country consolidation, and cross-country portfolio optimisation to streamline operations and improve efficiency.

Delayering: Telecoms are refining their portfolios and moving from integrated models to more focused ones, a trend that has been underway for several years. This move up the value chain is demonstrated by KKR’s proposed acquisition of Telecom Italia’s fixed-line network assets. We expect to see continued investor interest, particularly from infrastructure funds, in carving out fixed and mobile networks.

In-country consolidation: There is significant momentum in in-country consolidation, where telecoms seek to create shareholder value by scaling up within a country. Notable examples include Orange and Masmovil’s joint venture in Spain, Swisscom’s bid for Vodafone Italia, and Saudi Arabia’s Public Investment Fund’s move to acquire a controlling stake in Telecommunication Towers Company. These deals often aim to reduce the cost of domestic competition through partnerships or by achieving greater scale.

Cross-country portfolio optimisation: Telecoms are realigning their international strategies, driving deal activity as they seek to offload assets that are no longer critical to long-term shareholder value. For example, BT is looking to sell its operations in Italy and Ireland, while several US telecoms are exploring strategic alternatives for various businesses. This restructuring is creating opportunities for investors in assets that no longer fit the evolving business models of these companies.

“Over the past year, transaction volumes have slowed in a climate of market uncertainty. Nonetheless, the TMT sector remains supported by enduring megatrends such as AI and digitalisation, which are poised to catalyse growth in the future.”

Lasse Stünitz,Partner, M&A TMT Leader, PwC Switzerland

M&A developments in the Swiss TMT sector

As in prior periods, transactions involving software companies formed the backbone of Swiss TMT M&A deal activity, again accounting for 70% of all TMT deals, with IT services businesses – the next biggest driver – accounting for 15% of deals. Overall, technology remains king in the Swiss TMT deal space, with more than 90% of all TMT deals related to technology assets. With valuations currently trending below historical averages across TMT sub-sectors, software companies remain attractive M&A candidates, particularly in the cloud, analytics, collaboration, artificial intelligence, and cybersecurity sectors, supported by stable growth fundamentals, attractive business models, and room for consolidation. As a result, we expect the software space to continue to drive TMT M&A activity in Switzerland in the second half of 2024.

Continuing the trend of previous years and contributing significantly to deal activity, private equity and financial investors accounted for about two-thirds of all transactions in the Swiss TMT M&A space in the first half of 2024. This figure is up from just 20% in 2018 and significantly higher than what we observed on a global level (51%) for the same period. While the transaction share of private equity players in all other non-TMT sectors in Switzerland also further increased in the first half of the year, the 47% share is well below what we see in the TMT industry and underlines the special attraction of the TMT industry for financial investors. Given the current level of dry powder held by private equity funds, we expect continued deal activity from this group of buyers in the coming months.

M&A 2024 mid-year outlook for tech, media, and telecoms

Coping with economic uncertainty requires a focus on resilience and speed to capitalise on transformational deals. Dealmakers should prioritise navigating complexity with clear plans, aligning deal objectives with strategic goals, and positioning themselves for long-term growth by targeting sustainable advantages and considering divestments. Identifying and seizing transformational opportunities will be key to proactively managing portfolios and driving multi-year value creation across all business lines.

When it comes to M&A activity in Switzerland, we expect a continuation of the structurally lower deal volumes seen in recent months for the remainder of 2024, as global uncertainties, slowing growth across sub-sectors, and continued greater scrutiny and selectiveness by financial buyers will hamper deal activity.

At the same time, we are optimistic about 2025. We believe that pent-up demand for tech assets will drive deal activity next year when the market environment stabilises and valuations level off. Given structurally sound fundamentals and a thriving tech scene, Switzerland is poised for a recovery in TMT deal activity.

M&A industry trends in Switzerland

Learn about the key trends driving M&A activity in Switzerland