As tech companies look to open new markets and enhance their capabilities, more deals focus on expanding the scope of the business—nearly 90% of tech deals in 2019, up from only 50% four years earlier. It’s a trend we see across industries, but it’s more pronounced in tech. Customers are demanding more integrated technology solutions and the pace of innovation is increasing, so tech companies need to acquire new talent and capabilities to compete. But scope deals are often more complex than scale deals. Deal premiums can be higher, cost synergies are typically lower, and since talent and culture vary from one type of business to another, integrating teams can be more challenging. To successfully master scope integrations, companies need to overhaul their integration playbooks and adapt to the future of tech M&A.
Adam Haller is a partner with Bain & Company’s Global M&A and Technology practices. Chris Johnson is a partner with Bain’s Global Technology practice. Both are based in San Francisco.
More scope deals, more start-ups on the block, and the rise of institutional investors are just three trends causing acquirers to update their playbooks.