Now that profitability has been fully rebounded in 2022, revenue growth in the tech industry is expected to push forward for the remainder of the year.
That’s the opinion of more than half (53%) of tech industry executives polled by the Global Capital Confidence Barometer.
Firms across the tech sector outpaced market forecasts during 2021 when judged in terms of shareholder return. A recent EY analysis shows that the tech sector outperformed the market as a whole and has surged forward to outpace others in margins for growth.
One of the ways most executives say they plan to pursue growth is through an aggressive effort to facilitate more mergers and acquisitions.
Note that tech M&A activity has rotated between low and high quarters historically. Of course, in 2020, the year of the COVID-19 pandemic, the deal activity of all kinds grounded to a halt.
That didn’t stop CEOs, and their teams from pivoting — and that meant an explosion of merger and acquisition activity in the latter half of 2020 and continuing through 2021.
Now companies are positioning themselves for revenue growth by recalibrating their M&A strategies to focus on operational business resilience and digital technology alignment. Gaining market share via consolidation is also key.
Thus, the consensus is that the tech deal environment will remain active and robust. Some 78% of tech executives said they expect to see burgeoning competition in bidding processes for assets. Private capital operators will be the largest source of competition. All this is according to ET’s CCB recent report.
It is significant to note the amazing growth in special purpose acquisition company activity. These are what are known as SPACs. They became hugely popular in recent years because they offer many advantages to companies that are in pursuit of an IPO.
The number of new SPACs skyrocketed in the first part of 2021. They made up almost 50% of all tech M&A value. With a huge number of SPACs seeking companies that want to go public, higher valuations followed significantly. This is reshaping the traditional M&A market — although some experts are beginning to suggest that SPACs are overrated and overused.
The bottom line is that optimism reigns among tech executives in terms of returns to profitability and comfortable projections of growth through 2022, and mergers and acquisitions will be a driving force.