TMT M&A trends and outlook

In this article, we explore mergers and acquisitions activity in telecoms, media, and technology over the last 3-4 years and what the outlook will be going forward – including the key drivers of M&A and which sectors will attract most interest.

TMT M&A trends

A softening market – especially in Europe

The aggregate M&A deal value (where this is known) from the telecoms, media, and technology sectors rose from around $250bn in 2018 to a peak of nearly $650bn in 2021.  Things fell back to under $500bn in 2022 and the first 4 months of 2023 suggests a further reduction is likely in 2023 (the annualised equivalent of $143bn being under $430bn).

The market has held up well in the US and Asia – which are broadly on track to be similar or better than 2022 – but has collapsed in Europe. $136bn of European deals were done in 2022, whereas Jan-April 2023 has seen a paltry $12bn.

They key drivers for this decline include:

1. Concerns over the global and European economic outlook;

2. Continuing uncertainty over the war in Ukraine and the impact this could have on energy costs in Europe;

3. Rising interest rates across Europe making it harder to make the business case for leveraged deals;

4. Downward pressure on corporate earnings generally, and in the technology sector particularly – with several companies announcing major ‘reduction in force’ programmes. These were initially confined to big tech companies – Facebook, Google, et al – but, more recently, has included telecoms operators with both BT and Vodafone Group announcing huge workforce reduction activities.

This doesn’t mean deals can’t and aren’t being done.  It is just that they are often taking longer (as is raising capital for UK-based PE houses and investment funds), there is downward pressure on valuations, and the nature of deals is changing with a clear ‘flight to quality’ and infrastructure-backed deals coming to the fore.

Which sectors have attracted investment?

If we explore both the absolute value of deals and the growth between 2018 and 2022, there are 9 sectors within TMT which dominate M&A:

1. Cloud

2. Datacentres

3. eCommerce & Apps

4. Enterprise software and SaaS

5. Fibre

6. Fintech

7. Information services

8. Mobile telecoms

9. Towers and small cells

These 9 sectors collectively accounted for 77% of deal value in 2022.  Except for Fibre (which has shrunk in deal value) and eCommerce and Apps (which is flat), the other these sectors have all grown at a healthy rate over the last 5 years – 30+% per year which is comparable to many of the small sectors and, in the case of Information services at a whopping 123%. Beyond the big 9, Satellite has also grown exceptionally fast.

Of course, compound annual growth between two dates obscures what happened in the intervening years.  Examining the share of deal value for each year reveals those sectors that are moving steadily compared to those that bounce around year on year.

– Cloud and Datacentres have grown consistently between 2018 and 2022;

– Enterprise software & SaaS and Towers & Small Cells have been relatively stable (apart from a spike for the former in 2019);

– Fintech, Mobile telecoms, eCommerce & apps, and Information services have bounced around between years quite significantly;

  • Fibre, has shown a steady decline over the past five years.

As well as the growth and maturity of each sector, the absolute size of deals clearly has a big impact on the deal value in any given year.  And the sectors which bounce around most are those that have the widest variability in average deal size – essentially some big telcos deals were done in 2020 (NTT’s $40bn buyout of NTT Docomo and the $26bn Sprint-T-Mobile merger) and in 2022, IHS Markit’s colossal merger with S&P Global pushed the average deal value in Information services up hugely. The average deal value of the other sectors is more consistent meaning deal volume is the core driver of overall deal value and this drifts up and down a little more sedately.

TMT outlook: Key drivers and growth sectors moving forward

An analysis of the macroeconomic trends that will shape M&A in TMT will clearly be a material driver of the overall rate of M&A including within TMT but is beyond the scope of this article.

Instead, we will focus on drivers which will affect the relative rate of M&A between the sectors explored above including enterprise demand for specific services; the structure of each sector – number of companies, their health, etc.; technological developments; regulation; and so forth.  This builds on another recent article where we explored the drivers behind ‘Digital Market Infrastructure Market Trends’.

We have identified 5 factors that will impact TMT M&A and discuss their impact on specific sectors below:

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1. Fibre oversupply from alt-nets in many markets

In many markets, alternative network providers (alt-nets) have built extensive fibre networks to compete with the incumbent telecoms operators.  In the UK, for example, BT now competes in the enterprise and consumer market with a raft of retail players.  Except for Virgin Media O2, which has built its own network, these retail players lease fibre from wholesale alt-net providers such as City Fibre, Hyperoptic, CommunityFibre, Netomnia, Gigaclear, etc.

The retailers often enjoy the benefit of having competing alt-nets in the same location – this pushes wholesale prices down and means that many alt-nets are struggling to attract enough customers to generate a return on significant capital investment. Sometimes they have fibre in the street but have not ‘popped’ enough buildings. Sometimes buildings have been popped but they, or their retail ISP customers, have not got enough consumers or enterprises using their fibre.  Either way, the cause of the problem is the same: overbuilding networks leading to too much fibre chasing too few customers.

We anticipate a consolidation of alt-nets over the next few years with several companies selling below their book value to competitors and PE houses looking for bolt-on investments.


2. Growing enterprise demand for edge computing

Edge computing has been a hot topic for a few years and there has certainly been more compute being put into tier 2 and 3 cities (the ‘regional’ edge) across the US, and more recently Europe and Asia.  This build-out has resulted in several smaller regional data centre providers – comprising one or a handful of sites – which will be ripe for consolidation by larger counterparts.

The predicted rise of the ‘far edge’ – many small data centre sites very close to the enterprise customer – has been slower to develop as adoption of true automation, such as autonomous guided vehicles (AGVs) or ‘real-time precision monitoring and control’ where industrial machinery is optimised automatically and immediately, has taken longer to roll out.  STL Partners believes that this will change over the next few years as technology and the ecosystem matures and more capital will flow towards the far edge.  The result will be similar to what happened with regional data centres – lots of small players providing far edge compute infrastructure which will be consolidated by larger players and/or financial investors.

3. The rise of enterprise private networks

Automation doesn’t just require local compute, it also needs reliable, secure, and fast connectivity.  Many enterprises don’t have access to fibre and/or need the flexibility of a wireless solution.  They want to be able to control the characteristics of the network, so it supports their needs, and they don’t want to settle for the compromises offered by the public mobile network.  The result is growing demand for private networks – both fully private where the infrastructure and the logical network that runs on it are privately owned and managed or, more commonly among smaller companies, a blend of public infrastructure and privately managed logical network functions.  The range of public-private solutions is extensive.  For example, in many instances infrastructure will be owned by third-party neutral host networks that provide wholesale solutions to the mobile network operators and direct to enterprises.

In many markets, the private network market is growing very rapidly with several new entrants entering the market as neutral host networks or solution providers packaging together public and private elements to provide a bespoke enterprise connectivity solution.  STL believes that this ‘wild west’ approach will start to shake out and lead to significant consolidation in 2024 or 2025.

4. Increasing enterprise (and consumer) need for cybersecurity

Cybersecurity is already a key requirement for telecoms operators and enterprises and, as the demand for automation grows and greater reliance is places on telecoms and IT hardware and software, so the need for more effective cybersecurity to combat fraud, denial of service attacks, data theft, virus infections, etc.  Security breaches are already a major problem for most businesses.  As more and more business processes are automated and reliant on network and compute resources, a compromise of these could be catastrophic.

Because of this, enterprises are increasingly focused on cybersecurity and this market is growing at 10+% per year globally.  As well as larger players such as Fortinet, Palo Alto Networks, Broadcom, McAfee, and Trend Micro, a raft of smaller software companies have sprung up over the last 10 years.

STL anticipates that the market will continue to see healthy growth and strong M&A activity over the next several years.

5. AI-driven automation of business processes

Artificial Intelligence (AI) and Machine Learning (ML) has been on the up for several years but the launch of ChatGPT this year has really catapulted these technologies into the limelight.  As consumers and enterprises trial ChatGPT to automate manual tasks, so the capital investment in AI and ML will continue to grow.  Several of the big technology companies have invested significantly in building AI solutions:

  • Microsoft ($10bn invested in OpenAI, the company behind ChatGPT
  • Alphabet launched Bard AI – a chatbot rival to ChatGPT
  • Nvidia – the semiconductor manufacturer has an AI supercomputer platform, DGX AI, which will provide AI-as-a-service on the hyperscaler cloud platforms.

In addition, several niche AI companies have sprung up over the last 10 or so years usually specialising specific verticals.  Some examples include:

We suspect that the thousands of start-ups will translate into a few hundred scaled businesses and these, in turn, will become targets for big tech companies from 2025 and beyond.

The changes above are not the only factors that will impact M&A in TMT.  For example, we anticipate regulators relaxing some of their requirements on the number of mobile network operators in some markets.  This will likely drive consolidation in telecoms and, given the size of operators, could result in some chunky deals in Mobile Telecoms too.

In summary, setting aside macroeconomic trends, STL Partners is bullish on the TMT M&A market over the next few years.

Chris Barraclough


Chris Barraclough


Chris is the CEO at STL Partners and is a key contributor to both consulting and research at the firm. He has over 30 years’ experience in strategy and growth —25 in telecoms and technology working with telcos, data centre providers, and tech companies. Before co-founding STL Partners in 2004, he consulted for telecoms companies such as Verizon Business and Orange. He was also an equity analyst at JP Morgan. He holds an MA in English Language and Literature from Oxford University.

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