Q1: Tech M&A rises in ANZ as Australian tech unicorns lead capital efficiency

Our Deals platform data indicates the tide is turning for Australian and New Zealand Tech companies

As companies in all sectors undergo digital transformation and respond to rapidly moving AI development, tech mergers and acquisitions are expected to rise in 2024. 

Despite funding for tech declining by 42% during 2023 and a corresponding decrease of merger and acquisition (M&A) deals by 7% year on year in the first quarter of 2024, Q1 saw new Tech M&A deals rise by 28% in Australia and New Zealand, compared to the final quarter of 2023.  

In contrast to the generous valuations of tech companies in 2021, investors are taking a conservative approach coming into 2024, requiring capital-efficient growth and clear road-maps to profitability. 

Despite investors' lessening risk appetite, market demand for improved data management and interpretation, the adoption of remote work and the need to keep up with rapidly evolving technologies make tech companies desirable acquisition targets. 

Digital transformation motivates M&A deals rise in Australia for Q1

With a total 46 Australian tech M&A deals in Q1 of 2024 (GlobalData) valued at $6.5 billion, four were private equity deals. The largest disclosed deal was Renesas Electronics acquisition of Altium for $5.7 billion. This strategic acquisition enhances Renesas capabilities in digital device design, propelling digital transformation towards providing comprehensive solutions beyond chips.

Resilience and sustainability drive New Zealand tech M&A

In New Zealand, telecommunications, media and technology made up 19% of M&A activity (5 deals) in Q1, coming second (by deal number) to the financial services sector. Trade buyers accounted for four of these deals and one private equity deal made up the total. 

Among these is T4 Group, NZ’s co-location data centre operator, acquiring East Tamaki Data Centre’s assets from Kyndryl, the world’s largest IT infrastructure services provider. The deal will enhance existing operations and solidify T4’s commitment to energy efficiency, sustainability and enhanced resilience in New Zealand’s data infrastructure.

Australian tech unicorns: leaders in capital efficiency 

In Australia, a hyper-focus on capital efficiency and low-friction sales models drives tech ‘unicorn’ success globally. The Australian Financial Review identified Australian tech unicorn companies as world-leading in capital efficiency, producing 1.5 per billion capital invested, outstripping an average of 1.1 in the United States and 0.8 in the UK. 

Tech unicorns like Canva and Atlassian continue to perform well, bucking the global trends. A new class of world-leading private software companies founded in Australia are emerging, among these Employment Hero, Gol, Safety Culture and Pet Circle announced internationally-led funding rounds in the previous 12 months. 

AI boom poised to drive cross-border M&A in 2024

With the growing demand for artificial intelligence, the tech industry expects to see acquisitions increasing to propel digital transformation across sectors and borders. A survey from Norton Rose Fulbright at the beginning of 2024 shows global appetite for M&A activity is mixed, however over half expect to see this increase throughout 2024, with 23% expecting to see it increase significantly. Notably there is greater interest from private equity than trade globally, a space to watch in Australia and New Zealand this year. 

“Artificial intelligence - and generative AI, in particular, has fuelled dealmaking activity with strategic buyers eager to get their hands on high-quality AI technology to be applied to an ever-broadening range of use cases and industries. The opportunities and threats posed by disruptive technologies, such as generative AI to cybersecurity should also see continued cyber M&A activity,” observes James Bull, Special Counsel, Corporate & Commercial at Hall and Willcox. 

Discover: Indicators show the AI boom may drive M&A for Australian and New Zealand energy and utilities in 2024

Will AI shape how deals are sourced and evaluated in 2024? 

According to a study by Bain & Co, within three years generative artificial intelligence is expected to be used in more than 80% of mergers and acquisitions, a dramatic increase from the current rate of 16%. Early adopters are beginning to use AI models to source deals and sift through legal documents rapidly, though human verification is necessary and regulation is expected to follow. 

Stay ahead of the field with Ansarada’s AI powered virtual data room. Our world-first AI-driven Bidder Engagement Score is trained on thousands of deals to provide intelligent insights into complex sales processes, with 97% accuracy. Reduce hours from deal prep with bulk document redaction, understand bidder behaviour and eliminate duplicate work using smart AI. 

Digital transformation could continue to be a driver of tech M&A for 2024

The focus on acquiring technological capabilities and talent is crucial across industries and sectors. From financial services to energy, utilities and materials, the need to power efficiency with modern technology, improve customer experience, enable remote work, cut costs and transition to more digital-centric business models.

In addition to the need to drive digital transformation, diverse sectors must also find ways to meet ESG compliance and performance and show that a company generates a positive impact.

Our exclusive Deal Indicators report is designed to give insights into the market from the wealth of data collected anonymously through our Deals platform.

Download the Q1 2024 Australia and New Zealand M&A Deals Indicators report to gain early insights into the year ahead. 

 

Enjoy the report,

Justin Smith Chief Revenue and Marketing Officer