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Mergers and Acquisitions: Goes Tech

Michael Grimes, Managing Director of Global Technology Investment Banking at Morgan Stanley, a multinational investment bank and financial services company, accurately summarised technology convergence when he stated that until recently, “the majority of technology companies were sold to tech companies…But the world has completely changed. All companies need to become technology-driven”.

The rapid uptake of mobile and cloud technology has seen corporations use Mergers and Acquisitions (“M&A”) as a vehicle to develop their product portfolios and in turn make them more competitive in an increasingly digitized world. Developments like connected homes and driverless cars have, according to a January 2017 article published by the New York Times, contributed to a rapid escalation in technology convergence through M&A.  2016 saw non-tech companies in America acquire $128 billion worth of technology firms, compared to just $13billion in 2013.

Historically, whilst theoretically sound, the reality of such M&A attempts has not always materialised. For example, eBay’s acquisition of Skype was intended to boost trading on its online auction site by using internet phone technology but failed to live up to expectations. However, in light of Amazon’s US$13.7 billion acquisition of Whole Foods, not only are other large corporations driven towards technologically strategic M&A but Amazon has also proven that convergence can be a tool for tech companies to buy non-tech companies and as a result become an on and offline threat.

Bringing it closer to home, in May 2018 News Day online published an announcement by National Assembly Speaker Jacob Mudenda, that there was new company law being formulated with the intention of removing bottlenecks to M&A. Although this was in reference to the Zimbabwe Iron and Steel Company deal, the ease and expedition of registration processes promised in the updated legislation may undeniably help Zimbabwe open for business and in turn attract cross-border M&A. Growth in financial services naturally translates to growth within the technology sector as financial sectors increasingly use investment in technology as a means of upgrading their IT systems. It would also benefit Zimbabwean tech companies to “Amazon” and acquire/merge with offshore companies that will deepen their pockets in light of Zimbabwe’s cash shortage and also increase their competitive advantage in the market locally and abroad.

 The value in M&A remains undisputed however, with the current trend being technology convergence, Zimbabwe would benefit from strategic alliances on and offshore as a way to bring growth and technological advancement to the country.

 

Author: Reena Thaker Desai and Tashinga Bvekerwa