Global Technology Industry Report

Global spending on the technology industry has surged into the trillion-dollar range and continues to grow at a breakneck pace, with the world’s top five tech markets being communications services, data center systems, devices, software, and IT services.

KEY MARKET TRENDS

The technology sector continues to be one of the hottest areas for investment in a rapidly evolving world.

Agentic AI is an emerging area of investment. It uses a combination of different AI techniques, models, and approaches to create autonomous agents that can analyze data, set goals, and act to achieve them, all with minimal human supervision. The technology uses intricate reasoning in tandem with iterative planning to independently work out complex problems.

Post-quantum cryptography is being used to develop cryptographic algorithms that are thought to be secure against a crypt-analytic attack by a quantum computer. It is also known as quantum-resistant, quantum-proof, and quantum-safe.

Spatial computing is being used to allow humans to interact with simulated environments as though they are in the real world. The applications include virtual reality, augmented reality, mixed reality, affective computing, and contextual computing. They utilize sensors to sense nearby humans to create interactions with them in a 3D space.

AI governance platforms are becoming more important in regulating AI safely, minimizing risks, and managing the legal, ethical, and operational standards regarding its use.

Ambient invisible intelligence uses technologies embedded in an environment with invisible devices, providing unobtrusive interaction. There is a seamless integration of AI, machine learning, and the Internet of Things working in the background of everyday environments to offer personalized and automated assistance without drawing attention to its presence.

The area of polyfunctional robots is a surging focus for global investment. These highly advanced robots are capable of taking on multiple tasks by following human instructions. For example, in the healthcare sector, they are assisting with surgeries, rehab, and patient care. Also, the logistics industry helps sort, package, and distribute products, streamlining supply chain operations. Their diverse range of capabilities across various sectors is expected to drive market growth further.

As disinformation becomes a bigger worldwide menace, disinformation security is becoming a prominent area of investment for both companies and governments. It is designed to detect deepfakes, prevent impersonation, and protect reputations.

Energy-efficient computing is becoming a more popular area of investment. It uses smaller, lighter, faster computers to use the least amount of energy possible. This is important for reducing data center costs and carbon footprints while keeping up with data workloads and AI tasks.

Your Path to a Successful Sale Begins Here.

Another key market trend is hybrid computing, which uses a combination of computing, storage, and services in different environments, offering a higher level of flexibility and scalability for users, improved cost-effectiveness, and enhanced speed.

M&A

Companies in the technology sector are focusing on investments in all areas of operations to find new ways to innovate while relentlessly seeking to create value and growth.

M&A activity in the sector is expected to remain strong as inflation has cooled and interest rates have been cut, market dynamics continue to evolve, and private investors are in a stronger position than ever to deploy capital. Private equity is more focused than ever on disciplined investments that are rooted in resilience and growth potential. We can also expect to see more innovative deal strategies and collaborations, such as sponsor-to-sponsor deals, minority stake sales, and partnerships with sovereign wealth funds.

Mergers and acquisitions will likely remain an important growth strategy for both large and small tech firms, with vertical and horizontal integration on the table. Key areas of investment include:

• Datacenter creation, expansion, and technological innovation, particularly in cooling solutions
• Connectivity and fiber expansion
• Satellite connectivity
• Edge computing
• Cloud computing
• Supply chain resiliency
• Sustainability

Venture capital is still a key part of the tech M&A landscape after taking a bit of a backseat for a few years. Deals focus on sustainable growth, profitability, and long-term, scalable innovation.

Both private equity and venture capital benefit from deregulation, advancements in artificial intelligence, and global diversification. Some of the emerging markets to watch for innovation hotspots are Southeast Asia, Africa, and Latin America. These regions hold opportunities for both early investment and late-stage consolidation.

Additionally, more public companies that have become overleveraged are turning to transactions that take them back to being privately owned. This helps them restructure and get their long-term strategies back on track, which gives private equity a chance to snap up distressed assets.

Finally, the Rule of 40 remains an important financial concept for tech M&A regarding valuations. The principle is based on the theory that a software company's combined growth rate and profit margin should be in excess of 40%. This indicates that they are performing sustainably, while companies below this threshold may face issues regarding cash flow or liquidity.

Our Recent Success Stories in the Sector

Some of Benchmark International’s more recent successful deals in the technology space include:

• The transaction between Modus High-Tech Electronics GMBH and Mycronic AB
• The acquisition of Quotient, Inc. by Virtual Technologies Group
• The sale of Office Technology (Irl) to Intuity Technologies
• The deal between The Common Source and Aureus Group
• The transaction between Conarc, Inc. and Swiftcurrent Holdings, Inc., an affiliate of ESW
• The purchase of Computer Systems Integrators, Inc. by Acture Solutions
• The sale of Jardon & Howard Technologies, Inc. to Precise Systems, Inc.
• The acquisition of Greatsoft by Vela Software
• The deal between eLogger, Inc. and Vogl Ventures
• The transaction between H3 Solutions, Inc. and Auctus Technologies
• The sale of Guardian Software Systems, Inc. to Embrace Software
• The purchase of E-Vergent.com, LLC by Tahoe Network Infrastructure

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