Technology-enabled competitiveness is the name of the M&A game in 2022, says co-chair of Morrison & Foerster’s corporate practice Mitchell Presser. “We had done a survey a few months ago on where dealmakers are looking at deals, and two out of three most common answers were customer data management and business intelligence/analytics,” Presser says. “That’s using tech to create better solutions for your customers, to better sell, or manage their business relationships.” That suggests more digital transformation-themed deals ahead.

The past may well be prologue given the pace of private equity-backed technology deals in 2021. Information technology M&A activity weighed in at 1,309 transactions in the year through October, constituting 22 percent of deals inked according to Preqin. Financial sponsors are increasingly creating value by applying technology-generated synergies of impact to both the bottom line and ESG goals.

“Internet data centers are great private equity businesses in that they need endless capital going into them, so you need real pools of capital to expand. In certain areas of the world, Latin America, Asia,  we’re nowhere near saturation point,” says global chair of Morrison & Foerster’s private equity group Marcia Ellis. “But data centers use a large percentage of energy, as a PE firm, you can go in there and change where they get their electricity, and that can be an ESG transformation. PE funds are going in and figuring out a way to make a company more efficient.”

That marriage of ESG and technology bodes well for companies achieving targets on environmental and revenue lines.

Brandon Zero