Merger and acquisition bonanza to peak in 2022, says Gartner

The economic volatility caused by the COVID-19 pandemic is forcing many organizations to make tough decisions about whether to merge or acquire other enterprises, according to a new report from Gartner, which estimates that there will be more global mergers and acquisitions activity involving technology providers in 2022 than the highs seen in 2018. 

As the economy in the US has stabilized in 2021, there have been more mergers and acquisitions in the tech space, Gartner researchers found in the "Tech CEO: Acquisition Strategies During COVID-19 and Implications for Providers" report. 

Max Azaham, senior research director at Gartner, said tech CEOs pursuing acquisitions "should anticipate increased competition for targets and take steps to gain advantages over other acquirers to earn seller acceptance."

The study includes a graph that shows acquisitions were affected deeply by the pandemic in Q2 of 2020. But by Q4, the numbers had rebounded and reached levels that had not been seen since 2018, led by acquisitions of communications providers, services and software companies.

Financial services companies, particularly private equity firms, are also increasingly looking to acquire tech providers and software companies represented more than half of all acquisitions in 2020, Gartner found. 

There was a 93% increase in the acquisitions of communications providers in the second half of 2020 and acquisitions of service providers saw a 30% jump in Q4 of 2020. 

Enterprises and providers that had some overlap also increasingly consolidated in the second half of 2020, with an increase of 65% compared to 2018 and 2019. 

"Instead of making acquisitions or being acquired, tech CEOs will start to consider partnerships and ecosystems to level the playing field against larger companies resulting from consolidation in their markets," Azaham said.