Deal market should prepare for tech-driven disruption, dealmaker says

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The growing influence of technology-driven disruptions on the deals market means legal professionals must ensure they are prepared, said Connell O’Neill, Allen & Overy partner.

“Technology-driven disruption is impacting global M&A in a multitude of ways. The deal market should prepare for an acceleration in this disruption and an accompanying rise in venture, partnerships and buy-out transactions in the months and years ahead,” the Sydney-based dealmaker said.

The comments come after the release of the Allen & Overy M&A Insights Q1 2019 report, which found that there was a 23% year-on-year drop in global deal value in the first quarter. The global firm also saw an increase in auction activity in the quarter, continuing the trend it saw last year when over half of its private M&A deals were conducted via auction.

Australia saw growth in direct foreign investment, but the trend comes as foreign investment regimes are getting tougher, including in the country. Allen & Overy recently found an increasingly taxing regulatory landscape for cross-border M&A. It said that regulators around the world are more closely watching M&A activity, with Australia specifically applying a broader national-interest test.

In the first quarter, Australia, like China and the European Union, ended the merger review process, saying that it was taking too long. This highlights the need to streamline the process, the firm said.

O’Neill said that the deals space should see transactions driven by established businesses looking to meet changing customer needs and achieve optimal operational efficiency.

“For these businesses there are three key options – buy, build, or collaborate. This can mean anything from building their own platform, approaching an early-stage business for buy-in, or partnering with a company successfully implementing tech processes and collaborating to work towards a successful digitisation,” he said.

“While transactions supporting the digital transformation of a well-established business tend to be complex, many businesses hoping to stay in touch with customers in a fiercely competitive environment are realising they have no option but to make these investments,” O’Neill said. “In the meantime, the tech giants are steadily expanding into new markets and new sectors, seeking new investments to put their platforms at the heart of emerging business ecosystems. We’ve seen this from the Silicon Valley giants for some time; the ones to watch now are significant pan-Asian players.”

Connell O’Neill