Deals driven by disruption, both political and technological
The fundamental message technology executives have delivered in our 16th Global Capital Confidence Barometer is that technology M&A is still going strong, following record dealmaking in 2015 and 2016. More than half of the executives surveyed say they expect to pursue more acquisitions in the coming year, even as their optimism about organic growth and corporate earnings has been buoyed by surging confidence in the global economy.
Acting on political risk
But there are some warning lights flashing, as well. Technology executives tell us they are not only sensing political risks, but also acting on them.
Let’s first note that cross-border deals accounted for more than half of the value of technology M&As worldwide in the first quarter of 2017, according to separate EY analysis. And this Barometer provides some of the back story. Almost half of the executives say they have begun actively reorganizing geographic operations in response to the uncertainty surrounding today’s trade policy. About a quarter see a trend toward securing supply chains and market access through cross-border dealmaking.
Political risk actually is driving some deals — but certainly not all. We’re also told in this Barometer that nearly a third of the deals that fell through recently were terminated — at least in part — because of economic and political instability.
Ongoing technological risk
So, add political risk as a factor driving M&A, on top of the main deal-driver executives have cited in every recent Barometer: technology-enabled disruption. The stakes are high, they say: innovation, competition and customers.
Disruption — whether technological or political — is not going away any time soon. Many dealmakers see that as a call to action.