M&A - Mergers and Acquisitions
Atualizado: 5 de dez. de 2022
Why mergers and acquisitions? Are they really worth it? This is a question frequently asked by many shareholders/partners, directors/managers and boards of companies. Are mergers and acquisitions really worth the time and investment required?
The answer to the question posed is yes mergers and acquisitions are worthwhile, but it is necessary to ensure that the process is properly conducted i) before the M&A operation takes place, ii) during the course of the process and iii) after completion of the transaction operation, the so-called deal close.
Some examples: Most of the large companies that we know today result, on the one hand, from organic growth, and, on the other hand, from a set of successful business concentration operations over the years. Companies like Google have made more than 240 acquisitions worth more than $26.9 billion in sectors such as cybersecurity, social platforms, AdTech, etc. These acquisitions include companies such as Waze and YouTube. Microsoft, in turn, made 14 acquisitions of more than 1 billion dollars each, including the purchase of Skype (2011), LinkedIn (2016), GitHub (2018). Between January and June 2022, Microsoft already communicated its intention to acquire 4 large companies, including Activision Blizzard, Oribi (Acquired by LinkedIn), Minitab and Miburo, the latter company focused on threat intelligence research into new foreign cyber threats.
In Portugal: The mergers and acquisitions market in Portugal, according to the Transactional Track Record (TTR), increased in the number of operations by around 31% in 2021 compared to 2020, registering 553 transactions worth 19,200 million euros, of which around 20% (109 operations) of these transactions took place in the Information Technology sector.
Why are mergers and acquisitions (M&A) operations taking place?
What are the macro-trends for 2023?
There are several factors that lead to business concentration operations, and they vary over time.
Currently, the main factors that lead to the execution of Mergers & Acquisitions (M&A) operations are:
Search for market share growth which in an organic way would not be easy to achieve.
Leveraging synergies, economies of scale and cost reduction, taking into account the inflationary pressure that leads to an increase in the cost of productive factors, capital and work, it is fundamental for companies to improve their competitive capacity.
Access to qualified human resources, at a time when the demand for qualified labor is greater than the available supply, namely in terms of technology, especially in areas such as systems engineering, programming, data science, etc. Mergers & Acquisitions operations allow companies to access a larger pool of qualified human resources and thus leverage their ability to respond to customer needs.
Mergers & Acquisitions Trends for 2023
In 2022, market volatility, rising interest rates, the war in Ukraine and economic uncertainty weighed on M&A activity, causing a slight slowdown compared to 2021.
For 2023 and in view of the reasons mentioned above, namely the search for an increase in market share, obtaining synergies and economies of scale and access to qualified human resources will tend to boost Mergers & Acquisitions activity with greater emphasis on what concerns the sector of Information Technologies, in areas such as software development, cybersecurity, technological infrastructures, data analytics and immersive technologies leveraged by the growing trend of digital transition of public and private organizations.
Other activity sectors such as Banking and Fintech are also expected to register business concentration operations in 2023, in some cases leveraged by the growing demand in terms of regulation in areas such as compliance, which leads to the need for economies of scale.
PremiValor Consulting – M&A transactions currently open: PremiValor Consulting, which has a vast experience of over 20 years in the area of mergers and acquisitions, among other ongoing operations relating to mandates for the sale of companies, is currently advising two large international companies that are part of groups listed in stock exchange, in the purchase of companies in Portugal that operate in the sectors of: i) Information Technology, namely Cybersecurity, Cloud, Data Science/Data Analytics, Digital Technologies, Low Code and IoT Software. ii) Electronic Security Sector, namely alarm and fire systems.
Read more about the services of PremiValor Consulting in the M&A sector HERE.