Deals across the industry

In 2024, the technology and media (TMT) industry, with a combined enterprise value of $1.2tn (with half still pre-exit), experienced a dynamic year in the M&A landscape. Global technology and media deal volumes in 2024 were 27% behind 2023 but saw an increase in deal value. While deal activity was expected to accelerate, economic headwinds in the UK and globally, including the higher cost of capital, inflationary pressures, and geopolitical uncertainties, receded slower than anticipated. However, despite these challenges, deal volumes in the UK TMT sector remained resilient during 2024, with just a 4% overall decrease compared to 2023.

Whilst overall TMT deal volumes decreased marginally during 2024, advances in generative AI and other emerging technologies and greater stability in interest rates spurred investment notably from private equity with a 20% increase in buyout activity. This was primarily driven by growth across software and IT services deals due to their predictable recurring revenues and cash flows favoured by private equity investors. The media industry saw consolidation, especially in streaming services and linear TV, as companies adapted to changing consumer behaviours.

Our recent technology and media surveys further demonstrate the resurgence with 90% of technology businesses planning an exit in the near future, with 37% aiming for an exit within 1-2 years. In contrast, only 13% of media businesses were not planning an exit, with the largest proportion (34%) also targeting an exit within 1-2 years. The survey results emphasis the strategic planning and exit readiness in both sectors.

Overall, 2024 was a year of stabilisation for the technology and media industry, with a positive early signs of deal activity recovering in private equity.

Technology and media outlook for 2025

There is now greater confidence in the industry heading into 2025 as inflation has returned to more normal levels, interest rates have started to decrease with further cuts on the horizon in 2025 and key elections driving geopolitical uncertainty are now in the rear-view mirror. Despite this, there remains uncertainty heading into 2025 driven by ongoing geopolitical tensions including debates over tariffs by the US government and an uptick in borrowing costs earlier this month driven by increasing gilt yields.

As a result, competition for high-quality, business-critical assets in the technology and media industry is expected to increase. In 2025, we expect:

Private equity (PE) to continue driving activity, outpacing corporate buyers who are waiting for more certainty. PE showed signs of recovery in 2024 and is set to drive growth in deal flow in 2025. There is a strategic need for PE managers to realise returns for their investors on aging portfolios, including assets acquired during the peak valuations of 2021 and 2022, which will benefit from lower interest rates. PE investors are also under pressure to deploy their large reserves of dry powder. This is complicated by the ongoing gap between buyer and seller valuation expectations, driven by the increase in interest rates from historical lows. This will challenge PE investors to balance acceptable risk and reward. Additionally, large amounts of dry powder will increase competition for attractive deals, driving valuations up and making it more challenging for investors to balance risk and reward.
AI to continue transforming the industry in 2025 as more companies adopt the technology. Hyperscalers like Microsoft and Meta spent over $200bn on AI-related capital expenditures in 2024, driving M&A opportunities through the AI value chain, including data centres and tertiary sectors like energy and real estate. Companies that leverage AI to enhance product features and improve operational efficiencies will benefit from higher valuations. The government have recently outlined their commitment to AI: Prime Minister sets out blueprint to turbocharge AI - GOV.UK.
The continued trend towards digital transformation in specialised, industries with high moats will attract premium pricing.