IT Industry in 2023: Unveiling Big M&A Moves and Emerging Trends

Despite the economic uncertainties and subdued investment dynamics of 2023 largely influenced by high levels of inflation and interest rates, Outman has observed noteworthy mergers and acquisitions (M&A) within the IT sector with some transactions reaching a remarkable double-digit billion dollar price tag.

Proliferation of M&A Deals in the Cybersecurity Landscape

According to data gathered by CRN, the cybersecurity sector experienced the highest level of activity in M&A deals. In large part, this surge can be attributed to the escalating uncertainty and the imperative to enhance security in the face of current geopolitical conflicts. Notable instances include major manufacturers acquiring security tech startups, such as Cisco Systems' acquisition of Splunk, Valtic, and Lightspin. Additionally, cybersecurity companies engaged in acquisitions within their industry, as seen in Check Point Software Technologies' $490 million deal to acquire Perimeter 81, Zscaler's acquisition of Canonic, and SailPoint's purchase of SecZetta.

Sustained Interest in Embracing Generative AI

Amidst the growing interest in adopting artificial intelligence (AI) and machine learning, particularly generative AI, significant players in the IT industry have been acquiring AI startups to enter the dynamic and competitive AI arena. A prime example is Databricks' acquisition of MosaicML in a deal valued at $1.3 billion. With this acquisition, Databricks aims to empower customers with the capability to "build, own, and secure generative AI models with their own data."

The following is a selection of noteworthy acquisitions in the ICT sector:

Of these deals, potentially game changing ones include:

Broadcom's acquisition of VMware: Completed at $69 billion, including $61 million in cash and the assumption of $8 billion in VMware debt. One of the largest deals in IT industry history, the process involved extensive regulatory approvals worldwide.

Cisco's historic deal with Splunk: A $28 billion agreement, expected to close in Q3 2024 pending shareholder approval. The largest acquisition in Cisco's history, emphasising the company's strategic expansion.

OpenText's aggressive acquisitions: Including a $5.8 billion deal for Micro Focus, OpenText's expansion strategy involves significant acquisitions like Carbonite in 2019 ($1.45 billion) and Zix in 2021 ($860 million).

IBM's acquisition of Software AG platforms: IBM's deal to acquire StreamSets and webMethods from Software AG for $2.33 billion aims to enhance Watsonx, the company's generative AI offering, showcasing a strategic move in data ingestion and integration management.

These M&A deals highlight the growing investment in cybersecurity and tech firms integrating AI for enhanced data management, user interaction, and efficiency across various tasks. Some deals were announced last year and finalised this year, while others are still undergoing regulatory and/or shareholder approvals. Besides the fulfilment of these agreements, Outman predicts 2024 to bring about the announcement of several new M&A deals within this space.