Data and digital businesses bag record M&A investment

Data and digital technology-driven companies are attracting record investment in M&A activity, spearheaded by rampant private equity funds, and accounted for nearly half (47%) of the $87bn (£64bn) worth of deals struck in 2021.

Despite the pandemic, the figures – published in the Ciesco 2021 Global M&A Review and 2022 Outlook – reveal that, worldwide, the total number of transactions jumped 60% to 1,747 in 2021, compared to 1,092 deals in 2020.

Within that, the tech, digital, media and marketing sectors witnessed a 60% year-on-year growth in deal volume; 30% stronger than pre-pandemic figures.

Digitisation, data and technology business models also attracted new buy-in from private equity funds, which doubled their number of deals – up 96% – in 2021.

In fact, PE funding now accounts for nearly half of all M&A deals, which according to the report, reveals a newfound confidence from investors in those companies helping businesses with digitisation.

The US and UK were the busiest markets in the world in 2021, with 771 and 230 deals respectively. Western Europe’s overall deal activity grew 72% year-on-year, with France, Germany, Canada and the Netherlands all making strong gains.

Ciesco chief executive Chris Sahota said: “2021 was a year of significant opportunity for those who had planned ahead to stay relevant in a ‘new world’ which had witnessed a structural change in relationship between businesses and their customers. Digitisation, data and technology were at the forefront of that evolution and M&A was a key part of the transformation strategy for many companies through 2021.

“We expect continued strong appetite for M&A activity within the sector in 2022. The companies that showed resilience throughout the past two years were those that had been digital and tech savvy.

“Business leaders will want to continue to adapt their companies to the new world and drive business transformation across all parts of their organisation – marketing, sales, commerce, customer service and supply chain procurement.

Sohata added that with PE giants – often reported to have a war chest worth over £1.7 trillion globally to invest behind strong management teams – are driving competitive bids and higher valuations as investors compete for limited quality acquisition opportunities.

Backed by PE funds, both the number and scale of M&A deals were allowed to grow last year, with PE investment climbing 39% from 2019’s pre-Covid figure and far surpassing the 15% peak five years ago.

The most active funds include Blackstone ($731bn assets under management), which backed the expansion of HH Global in 2019, Oaktree Capital ($160.4bn) and KKR ($155.6bn).

“The PE route has become an attractive exit/partial exit opportunity for business owners. 2022 will be an exciting year of new business models and data and tech driven change happening at an even faster pace.”