Businesses around the world are now spending more on digital and technology assets than on traditional mergers and acquisitions, a comprehensive report by leading global law firm Freshfields Bruckhaus Deringer has found.
For the report, Freshfields analysed all 26,744 deals announced by the S&P Global 1200 between 2009 and 2017. During this period, digital asset spend rose more than 600%. In 2017, businesses spent a total of $258bn on digital assets, an all-time high.
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The findings show how big business has been on a five year bull run in this space and illustrates how business have increasingly seen the profitability of technology assets over the last nine years.
The average digital or technology deal – classed as those that aid a company’s digital transformation, increase an existing digital offering or consolidate a company’s position in the market – is now bigger than the average non-digital transaction.
Freshfield’s findings show that businesses are increasingly prepared to pay larger sums to acquire digital and technology assets.
Not only are digital deals more lucrative, they are also completed an average of 24 days faster than traditional acquisitions.
Which countries have the highest digital asset spend?
The report showed that the US has the most valuable digital economy in the world. That’s unsurprising considering tech companies, such as Google and Facebook, dominating the S&P 500.
More surprising, the UK came in at third behind the US and Japan in terms of deal volumes. And by value, the UK was the only country apart from the US in which the average tech or digital asset surpassed $1bn.
China, bolstered by the activity of tech giants Baidu, Alibaba, JD.com and Tencent, was the biggest spender, averaging $1.47bn per acquisition. US companies averaged $1.26bn comparatively.
China also announced the largest number of deals between 2009 and 2017, along with the Netherlands. Completing the top five by volume is Japan, Ireland, the US and Germany.
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What are the most sought-after digital assets?
It is often claimed that data is the new oil. Freshfield’s analysis lends some weight to this idea, with the number of large data set acquisitions doubling roughly every three years. Data analytics and cognitive analytics were also the third highest asset by volume.
However, software is the most popular commodity for businesses, with 39% of all tech deals revolving around software applications.
In terms of spend, health tech assets lead the way at $192bn, followed by cognitive technologies and AI.
Natasha Good, partner and global head of technology, media and telecoms at Freshfields, commented on the report’s findings:
“It’s a great time right now for digital and technology M&A, with the world’s biggest companies focussing on staying competitive by enhancing their capabilities”
“Deal-making in this space could become more challenging over the next few years, as foreign investment into certain technologies is facing increased levels of scrutiny from regulators.
“On Freshfields’s own major M&A mandates, we have seen an increase of more than 30 per cent in deals affected by public interest or foreign investment considerations1. However, our experience shows that with careful planning, businesses can still navigate this changing environment.”