COVID-19’s effect on high-tech & software M&A dealmaking

This piece was originally published as part of West Monroe’s latest Signature Research report, “High-Tech M&A Defies the Odds.” The full report examines the leading high-tech & software industry trends and explores the implications for dealmaking and value creation beyond 2020—a period that will create both challenges and opportunities for dealmakers as the industry and its consumers navigate through the COVID-19 pandemic. 

Tech companies with end markets in industries directly impacted by lockdowns, such as travel, leisure, and restaurants, have been particularly affected, as have pre-profit tech startups.

In the face of these challenges, 60% of respondents in our Signature Research report said they had postponed or canceled plans to make a high-tech & software acquisition.

But the evidence also shows that dealmakers are more than ready to make up for lost time: Even though COVID-19 has halted some planned deals, more than half of respondents (55%) said their appetite for deals remained unchanged or ultimately increased. Especially among PE players, pent-up demand created an extremely active and competitive market in Q3 and early Q4, with software a leading sector.

The pandemic has also accelerated certain technology trends and brought deals forward.

For instance, Just Eat Takeaway, the digital food delivery platform, merged with Grubhub in a $7.8 billion deal—a sub-sector that was primed for consolidation due to low margins and high customer churn.

In education technology, PE-backed Course Hero recently acquired Symbolab, an AI-based math-solving platform, and plans to make further acquisitions.

And in healthcare, we saw an $18.5 billion merger between giants Teladoc Health, the virtual healthcare company, and Livongo, which specializes in chronic condition management services.

Dealmakers paused their plans when COVID-19 struck, but the long-term outlook remains positive: High-tech & software deals will continue to accelerate.