Forsters attended the International Bar Association Tech M&A conference in Berlin on 23 and 24 March. While the Tech sector is being impacted by global macroeconomic conditions, there was a lot of optimism. Here are our key takeaways:
- The Tech M&A market has seen exponential growth for two decades, with 7 * growth in deal volumes. This has slowed down recently but the market is by its nature innovative, and so there remains a very positive outlook in the medium to long term. In particular, periods of instability are typically followed by a surge in M&A and investment activity once stakeholders gain confidence that valuations have stabilised, and there is a sense that there is a lot of 'dry powder' out there.
- Like in the UK, Founders of early stage companies across multiple countries are faced with a market of lower valuations and have been slowing their spend to extend existing cash so far as possible. Investors have been even more selective on where they place their money, with some moving away from the typical 1* preference as a way of balancing risk (though a mention of 8* having been proposed is concerning).
- Cybersecurity is a top 3 risk to businesses, with a range of solutions for stakeholders to consider when looking to protect themselves, such as checking that standards and measures have been implemented and monitored, insurance, and technical diligence, alongside legal diligence and warranties on deals. This should be considered on all deals involving data and secret information, not just those with a significant amount of personal data involved. Cybersecurity is a c-suite level conversation for businesses.
- Employee incentive schemes remain an important way of rewarding management and employees across the globe, with many taking the form of share/stock plans and phantom share schemes.
- Data remains a big topic. Tech businesses with international reach need to be on top of their obligations across various data protection frameworks and need an understanding of how they operate together, considering transfer impact assessments, the UK and EU data frameworks, the US executive order, and more.
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