Technology M&A 2025

Overview

Welcome to the fourth edition of Chambers’ Technology M&A Guide.

Continuing with the momentum that has been built over the last three editions, we are pleased to broaden the scope of this year’s guide and, along with welcoming back our previous contributors, we extend a heartfelt welcome to our new participants from various countries.

Notwithstanding major challenges that the industry has been facing over the last few years, technology M&A remains an important priority for many investors and companies. The growth in technology deals reflects both continuing consolidation within the tech industry itself as well as the increasing direct investment in technologies by traditional corporates in recognition of the strategic importance of staying at the forefront of digital transformation.

Artificial Intelligence (AI) continues to dominate the tech headlines and has quickly become a critical business asset across various sectors. Once just a futuristic concept for the majority of the population, AI (and particularly generative AI) has burst into our lives over the last two years and captured everyone’s imagination. Executives are constantly assessing how AI will change their businesses and industries, and many companies have integrated or are planning to integrate the technology into their day-to-day operations. Lloyds Bank’s recently published ninth annual Financial Institutions Sentiment Survey highlighted that two thirds (63%) of financial institutions invested in AI in 2024, a 32% increase from the previous year.

The rise of generative AI is quite clearly bringing a digital change, and this is driving investment in advanced technologies and digital infrastructure as a whole.

Investing in Digital Infrastructure

Powered by greater connectivity (including greater adoption of 5G) and mobility, the increasing adoption of technologies such as AI, the internet of things and enterprise cloud computing are driving greater demand for higher computing capacity and data storage for the growing mass of digital data created and consumed worldwide.

Despite the challenging macro environment and economic conditions, the outlook for digital infrastructure investments – particularly data centres – remains positive globally.

Additional data will need to be filtered in as generative AI algorithms require massive amounts of training data to learn. As the algorithms become more complex, they also need to make multiple copies of that data. Large language models such as ChatGPT require vast amounts of computing power to create and improve, which will also drive the need for data centres and supporting such specialised, high-performance computing platforms. The rise of “edge” computing (placing computing and data storage closer to where the processing takes place) is also driving the need for development of more data centres closer to cities and populations.

The number of deals involving data centres has increased steadily over the years, recording a compounded annual growth of 32% from 2017 to 2022. After a relative lull in 2023, data from the Synergy Research Group shows that data centre-oriented M&A deals have bounced back in 2024 and are once again poised to pass the USD40 billion milestone.

Expanding or building more digital infrastructure is not just about the challenges of raising or deploying greater investments in digital infrastructure. Different jurisdictions and regions globally face different challenges in expanding their digital infrastructure, including foreign investment regulations, local planning restrictions and the need for stable electricity connectivity for certain digital infrastructure (such as data centres and telecommunications towers).

Regulatory Tightening

As deal making in the technology industry has become increasingly more global, and with technology often being viewed as a strategic, defence and national security priority, regulators in different jurisdictions have been tightening requirements in their markets. Antitrust authorities have been challenging technology transactions more aggressively (even challenging perceived dominance of tech companies in a particular market), while foreign direct investment (FDI) regulations have been tightened in different parts of the world to protect nascent technologies from being acquired by foreign buyers.

For example, foreign investment regulators have been scrutinising the scope for data centres to provide hostile actors access to sensitive data, or control of the data centre to cause disruption or otherwise compromise national security interests. Specifically, the USA recently strengthened its FDI regulations and introduced mandatory filings, with a specific focus on the technology industry. France, Germany and the UK have adopted stricter requirements for acquisitions of tech companies in their jurisdictions, and the EU has adopted new co-ordination regulations across the region for sharing information and collaborating in FDI enforcement.

The US antitrust regulatory landscape, in particular, has seen significant developments in 2024. After more than two years of drafting, and following a public consultation period, on 10 October 2024 the FTC announced final changes to the HSR filing form applicable to reportable transactions. These changes significantly increase the burden of disclosure requirements on filing parties, including more expansive document productions, narratives on market dynamics, and information on the board membership of the acquiring person’s officers and directors.

Given the increasing cyber-threat landscape, governments are also focusing on cybersecurity for critical infrastructure. In 2025, we expect to see an increase in cyber-specific regulation in the EU and the USA.

Volume of M&A Deals

The first half of 2024 saw a moderate rebound in global tech investment after a consistent decline since reaching an all-time high in 2021, and with private equity and venture capital (VC) sponsors holding a record level of dry powder, the momentum is likely to continue through the end of the year. Investment activity involving data centres and cloud services has been a major highlight in 2024, with US-based data centre operator Vantage (USD9.2 billion) and cloud infrastructure platform Coreweave (USD8.6 billion) securing the largest funding rounds in Q1 and Q2, respectively. Continuing with the theme of the year, AI-related deals have also been a major factor in 2024, led by the USD6 billion VC investment in xAI (a US-based developer of AI platforms) and the USD4 billion late-stage funding in Anthropic (a US-based AI company). 

Tech M&A also experienced a mild recovery in 2024, largely due to the lowering of interest rates from the European Central Bank, the Bank of England and the Federal Reserve, along with robust stock market performance and stronger expectation of a soft economic landing in the USA – all of which have given deal makers the optimism required to end the year on a strong note.

Tech Exits

Technology companies that decide to continue their journey as independent players on their path to profitability can choose from a variety of forms:

• an IPO;
• a direct listing; or
• a de-SPAC transaction (ie, a merger with a special purpose acquisition company – although de-SPACs have significantly declined as an option for a number of reasons).

Global exit value has seen a significant decline after reaching a record high in 2021, largely driven by M&A and IPO exits. Tech exits declined further in the first half of 2024. 

IPOs

2023 proved to be another challenging year for the IPO market with the number of tech IPOs continuing to decline after a record year in 2021.The number of IPOs increased slightly in Q2 2024; however, it remains significantly lower than levels seen in 2021.

SPACs

SPACs are set up by raising money from public investors for the specific purpose of finding an acquisition opportunity. If a SPAC finds it, the private target:

• is merged into the SPAC in a so-called de-SPAC transaction (yet another alternative to a traditional IPO);
• gets additional funding through a PIPE investment; and
• becomes a publicly traded company at closing.

As an alternative to an IPO, a de-SPAC transaction is more likely to be pursued by less established, younger companies. Prevalent in the USA, SPACs started pursuing cross-border deals in 2021, and some countries were developing regulations to facilitate SPAC listings in their markets.

During the COVID-19 pandemic, SPACs provided an alternative path for a company to go public. However, the SPAC market has been in steady decline since 2022, with fewer SPAC and de-SPAC transactions completed. According to SPAC Analytics, SPAC IPOs have made up the following percentages of total US IPOs since 2020:

• 55% in 2020 (and 46% of total US IPO proceeds);
• 63% in 2021 (and 49% of total US IPO proceeds);
• 73% in 2022 (and 59% of total US IPO proceeds);
• 43% in 2023 (and 15% of total US IPO proceeds); and
• 38% in 2024 (and 19% of total US IPO proceeds).

According to Dealogic, the number of completed de-SPAC transactions (for SPACs registered with the SEC) has also been in steady decline, including:

• 64 in 2020;
• 199 in 2021;
• 101 in 2022; and
• 89 in 2023.

The decline in SPAC activity has been attributed to the overall disruption of the IPO market and high-profile failures of SPACs. However, a major factor has been the stricter regulations of SPACs across various jurisdictions. As the trend in SPAC transactions reversed, so did the desire of regulators and exchanges to facilitate them, with a number of regulators adopting a stricter approach to SPACs. For example, in 2024 the SEC adopted new rules that aim to align de-SPAC transactions more closely with traditional IPOs, by mandating specific disclosures and increasing the potential liability of deal participants.

Spin-offs

Spin-offs of subsidiaries by parent companies, to achieve various corporate and financial purposes, have also continued to be explored by technology companies. Tech companies are not new to spin-offs, as many of them came into being as independent companies because of a spin-off.

In 2024 spin-offs continue to be a viable strategy for well-known value companies, including Fortive Corporation’s spin-off of its Precision Technologies segment.

Using This Guide

As cross-border technology deals are often very complex and involve different legal regimes and cultures, we have organised this guide by country and asked each country’s contributor to address the same set of issues that a technology company going through its lifespan faces – from incorporation, early funding and VC rounds to the ultimate goal of being a public company or being sold at a high premium. We hope that you find this guide useful as you consider global deals.