Thursday, September 21

Digital transformation will drive investment in technology mergers and acquisitions

Digital transformation will continue to drive investment in technology mergers and acquisitions, according to the latest report from global law firm Baker McKenzie. The second in a five-part series of the TMT Looking Ahead 2022 report examines the M&A landscape in the industry, the development of important data protection, privacy, and cybersecurity laws, the importance of tax planning for technology transactions, and what to expect in terms of SPAC and de-SPAC market activity in the TMT sector.

The report highlights that intellectual property and data will continue to be essential drivers in any technology M&A deal, being key to monetizing digital products and services. Similarly, the report stresses that the development of data protection laws and regulatory practice will be key in acquisition strategies.

“Digital transformation, the reach and large-scale distribution of technology have changed the landscape of mergers and acquisitions, opening new doors for ever-increasing investments. Intellectual property (IP), as well as the ability to protect and market it, are critical to M&A deals as they will help drive key components of the deal, including finance/structuring, due diligence, representations, warranties and post-acquisition integration strategies. Intellectual property and data are essential to effectively monetize digital products and services, adding value to a company through trademarks, innovative technology patents and databases,” said Adam Aft, partner at Baker McKenzie in Chicago.

Private equity firms will continue to be key investors in technology companies, taking advantage of the opportunities presented by the rapid adoption of new technologies by companies.

Considering the development of SPACs, their history and new FIR regimes, Baker McKenzie also offers some practical advice for managing increasingly complex cross-border technology M&A transactions.

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Under the current landscape in 2022, regulatory teams need to keep up with the myriad of Foreign Investment Review regimes likely to come into play in global deals:

“Foreign investment regulation in strategic sectors of the TMT industry has increased in several markets, driven, in large part, by rising domestic protectionism and growing concerns about national security (including economic security). This trend reflects the importance that the sector and data have taken on for the world economy, as well as the resulting vulnerabilities that may exist. […] Cross-border technology M&A transactions have become more complex, especially when multiple jurisdictions are involved, so dealmakers should be aware of mandatory requirements to submit transactions for review and potentially consider voluntary notifications,” he commented. Samantha Mobley, a partner at Baker McKenzie in London.

This study is the second of five parts, three of which will be published throughout the year, covering interactive entertainment and the metaverse; 5G digital transformation; and TMT organizations as leaders of change.

The report, an 11-page PDF document, is available at this link. No registration required.

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