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Industry analysts predict a surge small tech acquisitions

Larger tech firms are expected to begin scooping up struggling startups

Shaking hands

Industry analysts believe that the coronavirus pandemic will encourage larger tech companies to kickstart acquisition sprees this year. Analysts told The Wall Street Journal that a tighter market in previous years could lead larger companies to purchase smaller tech companies in need of liquidity. 

Crawford Del Prete, president of International Data Corp, told WSJ that many large IT providers will look to fill gaps or expand into new markets in the coming years. To do so, these organizations are expected to target capital-strapped startups. Del Prete has already identified gaps in cloud computing and access management, and a need for tools geared toward remote work.

J. Neely, managing director and global M&A lead at Accenture PLC agreed, adding that “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.” 

With Microsoft announcing its acquisition of Softomotive earlier this week and Uber’s intentions to purchase Grubhub, it appears larger tech companies have already begun scooping up smaller players within the tech industry.

As Miro Parizek, a principal partner at Hampleton Partners, sees it, merger and acquisition activity has experienced a steep decline as companies face economic uncertainty. 

“What’s been dramatic has been that large deals have disappeared,” he said.

Parizek sees this changing as the year progresses, though, and expects mega-acquisitions of days past will soon be replaced with the acquisition of smaller tech companies.

“These large vendors have sufficient cash to weather the pandemic and have excess for acquisitions,” explained Max Azaham, a senior research director at Gartner.

Azaham continued, warning of unexpected outcomes if an acquisition surge occurs. With fewer vendors to choose from, avoiding vendor lock-in may become tricky, particularly if a bulk of technologies are owned by a single provider.

“For end users, there is a risk there will be fewer vendors to choose from,” Azaham warned.

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