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Modest growth in M&A activity predicted for next year
Thu, 14th Dec 2023

Biztech Lawyers and Intelliworx, two leading entities within the tech world, have offered their predictions concerning the state of the industry throughout 2024. Among the most notable expectations are a slight increase in technology mergers and acquisitions (M&A), the continued consolidation of companies, and a limited potential upsurge in "down round" investments. There is also growing attention on the transformative power of Generative AI.

Anthony Bekker, Biztech Lawyers' managing director, expects modest growth in M&A tech activity in the United States, the United Kingdom, and Australia throughout the upcoming year. This trend reflects a drive towards strategic consolidation aimed at reducing operational costs. Businesses and investors attempting to navigate the tech landscape should prepare for this slight uptick in market activity.

Companies consolidating cash reserves and seeking ways to streamline operational costs are driving recent M&A activity. This shift in focus from rapid expansion to sustainability and efficiency marks a departure from the previous trend of "burning through cash" through continuous funding rounds. Despite this, there is a limited likelihood of substantial 'down round' investments due to complexities in growth-stage companies' capitalization tables, as well as potential investor scepticism.

In terms of new opportunities, cash-positive companies and those who managed to raise significant capital in 2022 are in a prime position for strategic M&A activities. The initial deals observed in Australia, the US, and the UK suggest that consolidation can serve as a successful move for startups, offering them a path forward through mergers or acquisitions with financially stable entities.

Regional investor focus and government policy shifts shape emerging opportunities in the tech sector, even in the face of subdued valuations. For example, the UK is heavily interested in software, infrastructure, transportation, and financial services. In contrast, the US is focused on horizontal and vertical consolidations, and in Australia, fintech and quantum computing are attracting attention.

Government policies, especially those targeted at regulating critical and emerging technologies, will play an integral role in setting the investment narrative for 2024. Australia, for instance, is working on relaxing export regulations, investing $18.5 million in quantum technology through federal government intervention and introduced the Digital ID Bill 2023 to influence the landscape.

On another exciting note, Generative AI could emerge as a transformative force with both economic benefits and debates about its impact on employment. The technology represents an unprecedented investment opportunity, with short-term returns expected in knowledge worker tools and sophisticated applications yielding potential in advanced healthcare diagnostics and industry-specific complex problem-solving.

Meanwhile, Shane Maher, Intelliworx's managing director, forecasts increasing cybersecurity concerns due to the prevalent use of deep fakes leveraging AI, such as ChatGPT. This technology expands the threat of phishing and shows the increasing need for security enhancement in email and online collaborative environments. Expect tighter cybersecurity regulations worldwide and a global cyber-attack cost surpassing $10.5 trillion by the end of 2024.

These predictions also highlight the rising threat of software supply chain attacks, with threat actors exploiting zero-day vulnerabilities to infiltrate targets. Consequently, there is a demand for heightened vigilance and proactive measures to nullify potential disruptions. Also expected is a significant rise in cloud account hijacking, indicating an increased focus on protecting cloud environments in the cybersecurity industry throughout the upcoming year.