Coronavirus pandemic may prove as a boon for the big enterprise-technology companies, which according to industry analysts, are expected to go on a shopping spree for smaller tech firms.
The tighter market after coronavirus pandemic would leave fewer options for cash-strapped small companies, the Wall Street Journal reported citing industry analysts.
“What this means for Chief Information Officers is likely higher prices and less choice,” said Crawford Del Prete, president of technology research firm International Data Corp.
Prete said that the big IT providers will be looking to fill gaps or extend into new markets by targeting startups struggling aftermath COVID-19 induced economic slowdown.
Microsoft on Tuesday said that it was acquiring Softomotive, a robotic-process-automation maker that enables businesses to automate workplace tasks.
J. Neely, managing director and global M&A lead at consulting firm Accenture PLC, is of the view that for largest players, the upcoming period provides a potential opportunity to make plays to aggregate capabilities by acquiring smaller businesses
“For the largest players, we certainly see this immediate period as a potential opportunity to make plays to aggregate capabilities by acquiring smaller businesses that may need liquidity,” he said.
Large companies are also seizing the opportunity by making investments in smaller companies.
Uber Technologies is in talks with Grubhub Inc., The Wall Street Journal reported.
The Mergers and acquisitions have dropped off sharply in recent times due to uncertain economic conditions, said Miro Parizek, a principal partner at Hampleton Partners, a market advisory firm.
Moreover, many dealmakers are also unwilling to close a multibillion-dollar transaction without physical meeting the proverbial handshake, which is difficult to come by due to restrictions caused by the pandemic.
“What’s been dramatic has been that large deals have disappeared” in recent months, he said.
Gartner, an enterprise technology research and consulting firm, has estimated that the transaction volume was down 65 per cent in the first quarter from the year-earlier period.
However, Gartner senior research director, Max Azaham has pointed out that “large vendors have sufficient cash to weather the pandemic and have excess for acquisitions”
Gartner in April put out a guide on how tech startups can best prepare for being acquired by a larger company. the guide said the recession sparked by the pandemic is likely to change the nature of M&A strategies among larger companies in the year ahead.