Cybersecurity Emerges as Resilient Force Amid Declining TMT Deal Activity in 2023

Despite a downturn in M&A deal activity in the tech, media, and telecom (TMT) sector, cybersecurity stands out as a resilient outlier, according to findings by GlobalData.
Deals in TMT in 2023
As cyber threats escalate, companies are prioritizing investments in cybersecurity capabilities, resulting in a surge of related M&A deals throughout 2023. This steadfast growth highlights the critical importance of cybersecurity in the face of evolving threat landscapes and increasingly sophisticated cyber-attacks, states GlobalData, a prominent data and analytics company.

Cybersecurity-related deals reached $42 billion in 2023, making it the second-largest theme among the top 100 deals. Meanwhile, the total global TMT M&A deal value plummeted by 46 percent in 2023 to $403 billion, a significant decline from the $745 billion recorded in the previous year. Similarly, deal volume experienced a 26 percent decrease, totaling 451 deals in 2023, down from 609 deals in 2022.

70 percent of respondents indicated that cybersecurity was either already disrupting their industry or anticipated to do so within the next 12 months. The report highlights the growing threat of state-sponsored attacks and the increasing sophistication of ransomware attacks.

The largest cybersecurity deal of 2023 was Cisco’s acquisition of Splunk for $30 billion, also ranking as the biggest deal in the TMT sector for the year. This acquisition was followed by Honeywell’s $5 billion acquisition of Carrier Global’s global access solutions business and Thales’ $4 billion acquisition of Imperva.

Despite cybersecurity’s resilience, TMT M&A activity in 2023 was dominated by the connectivity theme, driving $72 billion worth of M&A deal value from the top TMT deals announced during the year. Major deals in connectivity included Kohlberg Kravis Roberts (KKR) and Abu Dhabi Investment Authority’s acquisition of Telecom Italia’s fixed-line business for $20 billion and Vodafone UK’s merger with Hutchison 3G UK (Three UK) for $19 billion.

In a broader analysis, the report categorizes all major deals announced between 2021 and 2023 into respective TMT sectors, such as hardware, software & services, internet & media, and telecom services, with details of the themes driving each deal.

A significant amount of M&A deal activity was driven by the application software sector in TMT, accounting for $114 billion across 86 deals, followed by telecom services, IT services, music, film & TV, and enterprise security software sectors, Priya Toppo, Thematic Intelligence Analyst at GlobalData, said.

Looking ahead, the report identifies potential future acquisition targets based on current market themes. Despite a notable shift in M&A dynamics in 2023, marked by a substantial decline in deal value and volume, GlobalData anticipates a modest recovery throughout 2024 as inflationary pressures ease and interest rates fall. However, companies must proactively address regulatory concerns and be prepared to make concessions to secure deal approvals amidst increased regulatory scrutiny.

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