How will 5G and other emerging technologies impact the global M&A Market?

Our modern society relies on connectivity on demand more than ever, and this isn’t restricted to personal use. As the world becomes more diversely interconnected, emerging technologies must evolve to keep up with our constant need for advancement. Many believe this will be powered by the rollout of 5G, which promises speeds of 10 gigabits per second straight to your phone. To put this into context – this is over 600 times faster than current 4G speeds, or fast enough to download a 4K film in as little as 25 seconds. In terms of mergers and acquisitions, this would increase the transfer of data whilst on the move, making the whole process faster and more efficient, as well as creating new opportunities for businesses to diversify through acquisitions, investments and new growth initiatives.

Research by Deloitte found that the implementation of 4G in 2010 contributed in excess of $150 billion to US GDP and resulted in more than 370,000 new jobs. Due to the far-reaching implications of 5G, it is expected to far exceed these levels. Vodafone has already predicted that 5G will give a £158 billion boost to the UK economy over the next ten years.

These technologies will not just impact our personal lives, it’ll also impact how businesses operate by leading to increased productivity and the emergence of new industries. Qualcomm have predicted that by 2035, 5G technology could underpin up to £9.3 trillion worth of goods and services within the UK economy. Huawei recently being blocked from the UK’s 5G networks is a key example of this, as Nokia is now positioned to become the UK’s leading provider of base stations and antennas which will enable EE customer’s access to 5G. This will see Nokia account for around 66% of BT’s radio access kit.

PSB Research reported that 82% of business leaders, analysts and technology enthusiasts think that emerging technologies, such as 5G, will drive small business growth and lead to SMEs becoming more and more competitive. This, in turn, will have a direct impact on the M&A market as more SMEs look to acquisitions, mergers, and disposals to remain at the forefront of their respective industries.

Businesses need access to their critical information at all times, and with the rollout of 5G this process is only going to become quicker, smoother, and more accessible to all. There is also a predicted blending of technology into more sectors; for example, agriculture is seeing the introduction of autonomous farming, where fields are scanned using a video sensor and fertilisers and pesticides are applied remotely. Manufacturing is expected to see a rise in the use of smart machinery, which will be providing and reacting to real time data. This large-scale rollout of new and exciting operational efficiencies will only serve to make their respective markers more profitable, more attractive to outside investment, and more open to mergers and acquisitions.

We are already starting to see the impact of emerging technologies on the M&A market – especially within the technology and telecommunications sector. A report by Ernst & Young has found that 55% of telecommunications executives are expecting to actively pursue acquisition within the next 12 months. Earlier this year, we saw the £31 billion merger of Virgin Media and O2’s UK operations, in a move that will seek to strengthen foothold within the UK against BT and Sky and accelerate the rollout of 5G networks across the country. The merger will see the new company investing £10 billion in gigabit-speed broadband and 5G networks.

Obviously, 5G and other emerging technologies will not solely impact the UK, the GSMA predicts that 5G alone will contribute £1.72 trillion to the global economy over the next 15 years. This could lead to an increase in cross-border acquisitions. A key example is American Nvidia’s acquisition of UK-based Arm for $40 billion.  Qualcomm has attracted a wide range of interest with investment from both other US companies, but also international investors including Australian Westpac Banking Corporation, French BNP Paribas Artitrage SNC and Norwegian DNB Asset Management AS. his is supported by PwC expecting to see a rise in demand for telecommunications companies, especially those providing wireless, wired, fibre, 5G services and telecommunications equipment. This has been seen recently through Microsoft’s current acquisition strategy, with their acquisition of 5G specialist Affirmed Networks and UK based Metaswitch Networks and Softomotive.

The rollout of 5G is going to vastly change the business landscape, which will in turn impact the M&A market. We are already seeing the impact that the rollout of these technologies are having on the M&A market with an increase of high value cross border deals. We are also expecting this to lead to an increase in deals which would allow companies to diversify and will see the interplay of technology with other sectors. We can also expect to see an upsurge of interest in SMEs within the technology sector by strategic acquirers and private equity firms.