Merger and acquisition (M&A) activity in the global TMT sector fell sharply in 2023, deteriorating from the year prior.

Total global TMT M&A deal value dropped 46% in 2023 to $403bn, compared to $745bn in the previous year. Similar trends were seen in deal volume, which totalled 451 deals in 2023, down 26% from 2022.

High interest rates and low growth across all the major economies have hampered activity by driving up the cost of borrowing and reducing risk appetites. Geopolitical tensions and regulatory scrutiny have also contributed to the M&A slowdown in the technology sector.

Big Tech’s battle for seamless acquisition

Big Tech’s ambition to use M&A deals to strengthen its position and expand into other markets is being hindered by regulators’ antitrust activism. Among Big Tech companies, Microsoft has been one of the most acquisitive from 2019 to 2023, investing over $100bn in themes like cloud, gaming, AI, and cybersecurity. Despite intense regulatory scrutiny, it managed to close its $69bn acquisition of Activision Blizzard in October 2023. However, regulators in the UK, EU, and US are currently investigating its $13bn investment in OpenAI, the company behind ChatGPT.

Due to increasing antitrust scrutiny on mega-deals (deals where the transaction value is greater than or equal to $1bn), there was an even sharper decline of 65% in terms of volume in the TMT industry between 2021 to 2023. Regulators worldwide are closely watching large acquisitions. Potential acquirers need to pre-emptively address concerns from regulators and be ready to make concessions.

At the end of 2023, ADOBE terminated its planned $20bn acquisition of Figma, following opposition from UK and EU regulators. In January 2024, Amazon’s proposed $1.7bn acquisition of iRobot collapsed in the face of EU scrutiny.

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AI continues to be a key focus theme for Big Tech

Big Tech is on the radar of regulators, who are heavily investing and looking for acquisitions in the key theme of AI. Big Tech companies are pouring money into Generative AI companies, such as OpenAI, Anthropic, and Cohere.

Tech companies with plans to pump large sums of money into AI start-ups must closely watch ongoing regulatory reviews, as there is now a growing risk that this kind of investment might be prohibited or limited by regulators.

The US still dominates the TMT market, though by less than in 2023

In 2023, US companies continued to lead TMT M&A deal activity with 146 deals accounting for 51% of deal value in 2023, worth $204bn. As in the US, antitrust regulators are considering lowering the thresholds at which they will deem companies to have significant market power. The UK, India, and China are also considering more stringent obligations for large digital platforms’ M&A plans.

TMT market outlook

The global TMT sector witnessed a notable shift in M&A dynamics in 2023, marked by a substantial decline in both deal value and volume. Companies will need to proactively address regulatory concerns and be prepared for potential concessions to secure deal approvals in an increasingly scrutinized landscape. Despite these challenges, AI will remain a focal area for Big Tech investment.