Member Article

What is digital disruption and how is it affecting merger & acquisition activity?

Technology innovation via mobile, social, cloud and big data analytics, or ‘digital disruption’, is transforming areas of business enterprise across all industries.

Mergers & acquisitions act as one way for both tech and non-tech companies to keep up with innovation, with 80% of tech executives predicting that global M&A will thrive in the next 12 months.

Such is the findings of the latest Capital Confidence study, conducted by professional services firm EY, which gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their capital.

The research revealed that 45% of technology industry executives plan to actively pursue acquisitions in the coming year, which is higher than the past three surveys launched in the same third-quarter period (44% in 2014, 33% in 2013 and 20% in 2012).

More than one third (34%) of technology executives are also planning acquisitions outside their own sector. New customer behaviors are cited above all others (46%) in driving technology companies to buy non-tech companies, and new product innovation ranks second (21%), according to the report.

Jeff Liu, Global Technology Industry Leader, Transaction Advisory Services at EY, said:

“As the overall M&A market hits its stride, the technology sector has continued to shatter M&A records from one quarter to the next. While digital disruption is not a new story, we have clearly entered a new chapter in its impact on M&A.

“It is one in which the customer is becoming a more digitally empowered protagonist. Changing customer behavior is driving technology company acquisitions of non-technology companies — and vice versa.”

For full details of the report click here.

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