The TMT sector remains the most significant in terms of deal volumes, and we expect this to continue this year. Q1 of FY24 saw a number of notable M&As including the largest software transaction in Australia ($9.1bn acquisition of Altium), and a potential multi-billion-dollar investment into Optus.
PwC’s 27th Annual Global CEO Survey 2024 – Australian Insights highlights the extent of pent-up demand for value through deals — with 59% of those responding indicating they plan at least one deal within three years with 34% planning three or more acquisitions in this timeframe.
How many acquisitions is your company planning to make in the next three years?
Source: PwC’s 27th Annual Global CEO Survey 2024
2024 outlook: Price rises on the cards
TMT volumes were subdued in 2023 (286 deals completed) following the pandemic highs of 2021 and 2022 (with 475 and 369 deals respectively). As deal values underwent a cyclical rebalance, total TMT deal value in Australia in 2023 dropped below A$3bn for only the second time in the past six years, in a sign that the price exuberance has now stabilised.
Australian Technology, Media and Telecommunications deal volumes and values 2020 - 2023
Source: PwC Analysis - Summary of Global AsiaPac and Australia M&A Trends for 2024 Outlook
There is reason for optimism in 2024 as the bid ask spread between vendor and buyer expectations narrows. With an expectation that interest rates have stabilised, dealmakers will have more certainty for both deal valuations and financing.
Key growth areas include:
Growth through Generative AI (GenAI): GenAI is stimulating significant growth in TMT — across all industry subsectors globally and Australian investment will focus on utilising these technologies across a wide variety of sectors. While tech enablement is nothing new, what is unprecedented is the speed with which emerging technology is revolutionising operations and service delivery while also offering new avenues for growth and value. Companies are leveraging tech solutions to reinvent and transform their operating models, enter new markets, increase capabilities, and transform their workforces - paving the way for business model re-invention.
Record levels of private capital: With a record amount of under-deployed private capital ($37bn) available for investment in Australia, private capital dealmakers are under pressure to realise value. Strategic industry investors have their sights set on transactions to accelerate transformation and value creation, and they’re willing to contest attractive assets with defensive characteristics and strong cash flow conversion metrics, as well as those assets that provide broader exposure to telco-type digital infrastructure.
Demand for Infrastructure: The $16bn takeover offer for Optus, Australia’s second-largest telecommunications group, highlights that telco infrastructure is in demand. Even where dealmakers are not yet ready to invest in GenAI and other emerging technologies, dealmakers recognise technologies require the foundations of digital infrastructure including data centre capacity, fibre connectivity, graphical processing units (GPUs), networking platforms/infrastructure and more.
How to create value in 2024
Three ways for TMT dealmakers to capitalise on opportunities and drive success:
1. Prioritise profitable growth
Over the last three to five years, there’s been an elevated focus on revenue growth, primarily due to significant premiums provided to public and private companies demonstrating accelerated levels of growth. The inflationary pressures over the last 12-24 months and subsequent impact on interest rates have contributed to material declines in technology valuations and a more challenging capital raising environment. TMT companies have been focused on cost reduction and core business models as they prioritise more profitable growth.
2. Explore public-to-private transactions
Pent-up demand and a trend away from listed markets has created opportunities for public-to-private transactions. This is especially the case in the technology sector, and particularly among private equity, where savvy investors are looking to acquire high-quality, lower-value public companies with strong earnings potential, and take them private.
3. Transact to transform
Strategic M&A continues to dominate TMT dealmaking as top-performing organisations reinvent their business models, using transactions to accelerate transformation and value creation. For instance, 67% of global TMT corporate leaders plan to use transactions to accelerate adoption of technology and tech-enabled processes (PwC UK’s Value Creation Transformation Survey).
Explore our national findings, plus other industry insights as part of this series
About the data
We have based our commentary on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by the London Stock Exchange Group (LSEG) as of 31 December 2023 and as accessed on 3 January 2024. This has been supplemented by additional information from Preqin, S&P Capital IQ and our independent research. Certain adjustments have been made to the source information to align with PwC’s industry mapping.