The tech sector remains a popular sector for private equity investors. Research data suggests that the technology sector represented the largest industry for U.S. M&A in 2020 and 2021, both by number of transactions and transaction values.
A recent Goldman Sachs report expects that PE firms will play a more important role in M&A transactions where larger companies intend to evolve their business models through, for example, acquisitions of technology companies or innovative companies that have successfully incorporated technology into their businesses.
As many have observed, the pandemic has been a key driver as businesses are looking to invest in or acquire technology companies to support their adaptation to a more digital economy. Importantly, companies in every sector have been reshaping their use of technology as their internal business processes and their interactions with suppliers and customers have been moving online. As such, technology is increasingly becoming more significant in most M&A deals, even those outside of the traditional technology sector.
According to a Gartner report on cybersecurity predictions for 2021-2022, organizations are increasingly measuring cybersecurity risk when assessing targets and counter-parties in M&A transactions and other commercial relationships. Gartner estimates that by 2025 60% of organizations will measure cybersecurity risk in business dealings with third parties. A security breach or ransomware attack can cause significant problems for an organization, including the requirement to notify governmental agencies, contact customers, and offer credit monitoring and call center services.