FROM AI TO DE-RISKING: TRENDS TRANSFORMING TMT TRANSACTIONS
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The TMT sector has long been a hub for M&A activity, driven by rapid innovation and shifting consumer demands. In recent years, the landscape was shaped by the accelerating influence of AI, the imperative to de-risk global supply chains, and a renewed focus on portfolio rationalization. These trends are not only redefining the motivations behind M&A activity but are accelerating a structural shift from a reliance on fragmented value chains and legacy business models to integrated, AI-driven, and risk-resilient operating platforms.
The TMT sector has long been a hub for M&A activity, driven by rapid innovation and shifting consumer demands. In recent years, the landscape was shaped by the accelerating influence of AI, the imperative to de-risk global supply chains, and a renewed focus on portfolio rationalization. These trends are not only redefining the motivations behind M&A activity but are accelerating a structural shift from a reliance on fragmented value chains and legacy business models to integrated, AI-driven, and risk-resilient operating platforms.
AI-Driven M&A: Strategic acquisitions
AI’s transformative impact is prompting companies to pursue M&A opportunities that accelerate their technological capabilities. Valuations of AI companies remain high despite broader market corrections. Companies are targeting specialist AI start-ups to access proprietary technologies, enhance automation, and foster innovation. As a result, dealmaking is increasingly centered around access to intellectual property and AI talent, intensifying competition for high-value assets.
Supply chain de-risking: Internalizing critical infrastructure
Global disruptions over recent years have exposed supply chain vulnerabilities, prompting TMT companies to reassess third-party dependencies. M&A is increasingly motivated by a desire to bring critical infrastructure in-house. Acquiring key suppliers or technology providers allows businesses to internalize essential processes, thereby mitigating risks associated with geopolitical uncertainty. The push to internalize critical infrastructure is intersecting with national security agendas. TMT M&A deals involving semiconductors, cloud infrastructure, or data centers are more frequently subject to foreign direct investment (FDI) screening and CFIUS-type reviews.
Blurring customer-supplier lines: Antitrust and contractual questions
After acquiring former partners, TMT companies are assuming dual identities as both service providers and consumers. While fostering new forms of collaboration and competition, as well as more complex commercial relationships, the convergence of roles also raises novel legal questions. Transactions that reduce market competition or risk creating dominant players due to ecosystem control and data access may trigger antitrust scrutiny.
Contractually, the shift to intra-group relationships requires careful navigation. Transitioning from commercial to corporate relationships often exposes gaps in IP ownership, data governance, and liability allocation that must be addressed early in the process. Existing contractual arrangements need to be revisited or renegotiated, and legal advisors must anticipate and address these emerging issues to ensure compliance and safeguard commercial interests.
Portfolio rationalization: Focusing on core capabilities
Amid market volatility, TMT companies are streamlining their portfolios by divesting noncore or underperforming assets. This portfolio rationalization enables efficient capital allocation and quicker responses to market shifts. M&A activity is thus characterized by both strategic acquisitions and targeted divestitures, positioning companies to better weather economic uncertainty and technological disruption.
Key takeaways
AI integration, supply chain de-risking, and portfolio rationalization are fundamentally reshaping M&A activity in the TMT sector. While these trends offer significant opportunities for innovation and growth, they also present new legal and strategic challenges in terms of competition law and commercial arrangements. Those who can integrate innovation, risk management, and compliance at the deal table will be best positioned to shape the next chapter of digital transformation.
Key takeaways
AI integration, supply chain de-risking, and portfolio rationalization are fundamentally reshaping M&A activity in the TMT sector. While these trends offer significant opportunities for innovation and growth, they also present new legal and strategic challenges in terms of competition law and commercial arrangements. Those who can integrate innovation, risk management, and compliance at the deal table will be best positioned to shape the next chapter of digital transformation.
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© Eversheds Sutherland. All rights reserved. Eversheds Sutherland is a global provider of legal and other services operating through various separate and distinct legal entities. Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed and affiliated firms and the members of Eversheds Sutherland (Europe) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements and operate in accordance with their locally registered names. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the Eversheds Sutherland Entities are in a partnership or are part of a global LLP. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client.
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