How will COVID-19 impact M&A in the tech space?
I was reading an article in the CIO Magazine headed ‘The biggest technology M&A deals of 2020’ and was pondering how the COVID outbreak would affect the merger and acquisition (M&A) landscape for the rest of 2020.
As of the end of 2019, there were roughly $250 billion worth of technology M&A deals. And by all accounts, 2020 was off to a flying start with a number of large technology M&A deals being announced. Then COVID arrived and it all came to a screaming halt.
In a post-COVID world, what are the most important factors buyers will be looking for in future acquisitions? Will it be systems that support remote capability? The integration of AI? Robotics and automation? Maybe healthcare technology?
The one key issue that continues to constrain the growth of so many of these technology providers, is the ecosystem to support their growth. We hear this term used all the time, but what does it actually mean?
It’s pretty simple. How can Pegasystems grow without having enough Pega certified software engineers to implement Pega installations at client sites?
Whether it’s Salesforce, AWS, Pegasystems, Servicenow or Appian, these software providers have the same challenge — finding enough certified practitioners to roll out their technology to their clients.
As we see M&A activity start to grow in a post-COVID world, how important will the ability for software companies to support their own ecosystem become in relation to how these businesses are valued?
Also, will the impact of COVID only make this worse? From what we’ve seen, clients haven’t necessarily been hiring certified software engineers since the outbreak, but projects are still moving forward. This push with a lack or resources only further places pressure on timelines and available resources.
No doubt with the restrictions on the H1B program that will further exacerbate this process. Supporting the ecosystem yourself or finding a partner who can help you support that ecosystem is vital to success and growth in valuations.
It will be interesting to see how these technology partners continue to address this challenge once COVID restrictions are lifted. I believe that how companies move forward will identify and define their success in the post-COVID world