3 Reasons Why Tech M&A Is Set To Bounce Back in 2024

Is the tech M&A market set for an almighty rebound in 2024? Many analysts and senior dealmakers believe so, sounding a loud and very welcome note of optimism after a protracted market slowdown.

The uncertainty and sluggish activity witnessed in the last few years were in marked contrast to the white-hot pace of 2021, when global M&A volumes broke the $5 trillion mark for the very first time. Speaking to Reuters at the time, a spokesman at JP Morgan observed that “corporate balance sheets are incredibly healthy, sitting on $2 trillion of cash in the US alone, and access to capital remains widely available at historically low costs.”

This, plus plenty of pent-up demand following a pause on M&A activity in the immediate aftermath of Covid, alongside an abruptly accelerated appetite for digital solutions in the wake of the pandemic, set the stage for an M&A feeding frenzy with a particular focus on the tech and healthcare sectors.

M&A activity dropped sharply in 2022 and 2023, when markets were hit hard by multiple factors, including global inflation and rising interest rates which made it costlier for many corporate acquirers and private equity firms to raise financing. Earth-shaking geopolitical instability, widespread supply chain disruption, and a bursting of the lockdown bubble (after a period when interest in e-commerce startups reached fever pitch) all played a part as well.

But there’s now a growing consensus among researchers at firms such as S&P Global, Morgan Stanley, Deloitte – and here at Hampleton Partners – that a major turnaround is underway. Indeed, a new study by S&P Global, which draws on insights from prominent dealmakers, reports “a near-record level of bullishness for activity as well as valuations”, representing what it calls “the single largest swing in sentiment” among tech dealmakers in 20 years.

So, what are some of the catalysts bringing momentum back to the market? Let’s consider three of the big ones.

A relative easing of the economic turbulence of recent years looks set to be a galvanising force in 2024, with S&P Global’s survey revealing that the majority of dealmakers don’t anticipate that inflation and uncertain growth outlooks will negatively impact M&A activity.

It’s a sentiment recently echoed by Carlyle Group co-founder David Rubenstein. Speaking in an interview during the World Economic Forum at Davos, he said that, while interest rate surges last year raised concern about ever-lower M&A activity, “interest rates are coming down almost certainly very soon, so I think you’ll see a lot more M&A activity and a lot more private equity activity.”

Tech industry dealmakers responding to various surveys have made it clear that they expect strategic, corporate acquirers to provide much of the rebound momentum in 2024. This sentiment was underscored in a recent report by Morgan Stanley, which stated that “corporate activity is poised to strengthen” thanks to robust balance sheets and increased CEO confidence regarding revenues and profitability in 2024, compared to 2023.

Strategic acquirers have traditionally led activity in the tech sector, but last year they were barely ahead of financial acquirers in terms of amount spent on transactions. Indeed, for the first time in over two decades, financial acquirers dominated when it came to the very biggest blockbuster deals, with private equity firms announcing more transactions valued at $10 billion or higher than strategic acquirers.

One very recent blockbuster deal by a strategic acquirer can be seen as a sign of how things may pan out very differently in 2024. Namely, the $14 billion purchase of networking products maker Juniper Networks by Hewlett Packard.

“This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds," is how Hewlett Packard CEO Antonio Neri described the purchase, which takes us neatly into the third big driving force for renewed vigour in 2024…

It’s significant that Hewlett Packard’s purchase, one of the first mega-deals by a strategic acquirer this year, has been motivated by the AI revolution. The desire to snap up the latest AI innovations and Next Big Things is widely expected to be a major momentum-driver for M&A in 2024, with S&P Global reporting that “while generative AI’s standing on the top of the podium probably wouldn't have been a surprise, the magnitude of the outperformance is noteworthy. It is the highest-ranked trend we have ever asked about in our surveys.”

The pressure on tech companies to remain competitive and provide the kinds of product portfolios their clients and customers expect in our brave new era – ie, products and services which leverage AI for all manner of use cases – means that many will regard AI-focused strategic acquisitions as night-on essential this year.

But, even putting aside the once-in-a-generation mega-trend that is AI, the continuing pace of digitalisation in general is also expected to be a major deal driver this year. We can add to this the pressure to adhere to ESG requirements and expectations, with companies engaging in so-called “green dealmaking” to acquire cleantech solutions and expertise.

Here at Hampleton Partners we’ll be closely monitoring developments in what is tipped to be a transformative year, and look forward to continuing to advise on global tech transactions.

If you’re a founder, CEO or senior decision maker in tech, and are seeking advice and guidance with regards to a possible transaction this year or beyond, please feel free to reach out to our expert dealmakers.