Earlier this year we looked at trends in M&A investment in the technology sector, highlighting the TMT sector was the best performing sector in 2023 in terms of deal value and volume. The sector has remained fairly subdued this year, but are there signs this could be changing? We explore with our colleagues in the UK, Europe and China the outlook for the sector in their regions, and the impact of regulation on M&A investment in the tech sector. 

A subdued landscape across Europe (01:54)

Overall the tech M&A marketing across Europe has been subdued to some extent, but there have been some interesting deals in the last few months which underlines the activity of the PE firms in the technology M&A market in Europe, which we expect to continue.

Slow recovery in China (03:18)

In China we have seen a trend of recovery, with a slight increase in the tech sector during the first half of 2024, although the rest of Asia Pacific remains slow. This has largely been driven by cash-rich public companies and unicorn start-ups as the main market players, as well as the liberalisation of PRC policies trying to attract foreign investment. 

On the other side, geopolitical tensions led by the tech competition between the US & China & regulatory scrutiny are among challenges preventing rapid growth of M&A activity of tech sector in China.

Regulatory trends in the UK and EU (05:32)

Regulation has become an increasing factor in tech and TMT M&A over the last few years, and we’ve seen the competition authorities in both the UK and EU take a very close look at the sector, and deals in the sector, which we expect to continue. There are two particular changes to mention:

1. The new SMS Regime – which allows the CMA to designate the largest tech companies a special status, which means that they will need to make mandatory notifications qualifying acquisitions to the CMA so they are aware of those deals
2. New thresholds coming in to allow CMA to look at more transactions in this space, focusing on trying to catch so called “killer acquisitions” which are smaller acquisitions which might be important for the sector as a whole

We also mention the recent Illumina/Grail Judgment, which although an important case, represents a much broader direction of travel towards the competition authorities across the UK and EU having more flexibility to look at deals in the tech sector, which we expect to continue. 

Attracting foreign investors to China (09:00)

There have been efforts to reduce unnecessary access barriers in China to attract foreign investors, however for key national industries, the Chinese Government always adopts a strict view, and foreign investments to these sectors are subject to National Security Review if certain qualifiers are triggered. Specifically in the tech sector, important information technology are usually considered critical areas relating to national security, so if any transactions involved are usually subject to a National Security Review in China.

Another important regulatory trend relates to recent developments on the PRC merger control filing regime, which is having significant impacts on M&A deals in China, specifically in tech sector.

Find out more about M&A trends in the TMT in our longer briefing here:

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