Scaling Success: How M&A is Shaping Technology, Media & Telecommunications
Global technology, media, and telecommunications (“TMT”) M&A has continued a strong run with deal value surging from $16 billion in 1H 2023 to $43 billion in 1H 2024, according to Bain & Company. Looking at aggregate figures, Europe, the Middle East and Africa accounted for more than 40% of global activity while North America accounted for the remaining percentage of global activity.¹
In particular, mobile and fixed network companies are pursuing scalable deals to capture market share. T-Mobile, for example, announced their acquisition of UScellular for $4.4 billion and is set to close mid-2025. This deal marks the expansion of T-Mobile’s 5G network to underserved rural areas by providing superior connectivity.² Financial investors continue to acquire fixed assets within the TMT sector, suggesting the growing confidence in digital infrastructure business fundamentals despite recent headwinds as described below.
M&A continues to be a key growth driver for the TMT sector as noted by Cisco Systems’ acquisition of the cybersecurity company Splunk—capitalizing on new intellectual property and talent.
Opportunities at Scale1,3,4
Technology & Telecommunications
Programmatic M&A offers a promising outlook for investors and buyers as opposed to an opportunistic M&A approach. In this context, deals valued below $500 million have dominated the market in recent years, making up 88% of total transactions and 21% of deal value between 2022 and 2023. At the same time, megadeals of more than $5 billion remained a common occurrence within the TMT sector relative to other sectors with 44% of total transaction value from 2018 to 2023 compared to 34% total transaction value across all other sectors.
As mentioned, TMT players are continuing to consolidate—Virgin Media’s merger with O2 in July 2023, offers customers competitive TV, mobile and broadband packages that rival BT and Sky, well-known mobile and internet operators in the United Kingdom. According to McKinsey, M&A lead expansion will be concentrated within existing product categories, to add new categories, or to expand geographically, but with a greater focus on cross-selling.
Hexagon, a creator of automation systems, has completed over 170 acquisitions since 2000, spanning across multiple disciplines in both software and hardware applications.
Media
Social media’s short form content has piqued the interest of financial buyers as TMT businesses pursue M&A consolidation efforts paired with organic efforts to scale market share by anticipating consumer demands. Tik Tok’s powerful combination of rapidly created and easily consumed video content served serially through a highly-tuned algorithm has reshaped the way social media platforms reach audiences. Similarly, Instagram’s “Reels” and Facebook are using stories and short-form videos to keep users engaged. In response, social media influencers and content creators are spearheading changes in the entertainment landscape through the utilization of short-form channels.
With a large portfolio of assets and brands across media channels and investments in high-end productions of television series and movie content, multimedia businesses produce highly diversified revenue streams with the new goal of creating a loyal customer-centric foundation with a variety of content styles to be boasted by influencers and content creators.
The emergence of large language model artificial intelligence (“AI”) technologies and Generative AI are starting to heavily impact the Advertising Technology sector. Streamlined processes tailored to individual viewer preferences have shown positive results through campaign and creative optimization, driving higher returns on ad spend and greater efficiencies for ad agencies.
Taking a holistic approach to portfolio configuration is paramount to the continued success of generating significant media firm value through M&A. Strategists should also consider divestitures to generate cash, mitigate risks and remain focused on expanding engagement with consumers already interacting with their channels and content.
Obstacles to Note3,4
Political headwinds should keep buyers, sellers, investors, and strategists cautious about the regulatory environment and M&A restrictions that could result in long waits for approval, increased uncertainties for remediation and greater transaction complexity.
- Technology: Geopolitical tension may hinder deals as further scrutiny could be placed on digital infrastructure by regulators combatting potential data breaches and issues around privacy.
- Media: Large companies have strengthened their market power through the acquisition of smaller businesses and should continue to refine M&A strategies to reach new niche or geographic markets to deliver growth.
- Telecommunications: Consolidation should continue to help companies manage overhead costs and investment needs, though regulators will keep a hands-on approach within the industry’s infrastructure and ecosystem to ensure healthy competition and protect consumers.
With an increasingly consumer-centric ecosystem within TMT, companies will be likely to focus on finding the most efficient means of scaling to reach target audiences through advertising, breadth of services or content, and increasing cross-selling opportunities to increase profit yield from their engaged consumers.