December 18, 2023
Corporations will intensify their focus on artificial intelligence (AI) and technological integration in 2024, deeming them indispensable for success, according to Translink Corporate Finance’s ‘2024 Megatrends Report’. Featuring insights from global Translink partners, the report identifies six top trends that will shape the M&A landscape in 2024 and beyond. One of the trends points to tech as a crucial driving force for mergers and acquisitions (M&A) as sectors adapt and hybridise to get the requisite solutions to transform.
Tech market highlights discussed in the report include:
- AI and technology are reshaping M&A: Corporate strategies and M&A continue to see robust investment in IT, with AI playing a supplementary co-pilot role.
- CEO’s talent challenge: There is a growing need for employees to enhance their AI skills to stay competitive and for CEOs to transition from reactive to proactive human capital management and recruitment.
- The rise of reinvented unicorns: A shift is evident across the tech industry landscape, with new players emerging as underperforming tech unicorns take a step back.
- AI’s role in accelerating due diligence and dealmaking: Although AI can accelerate elements of due diligence and synthesise mundane information, it cannot replace humans.
Marc Irisson, Partner at Translink Corporate Finance France and Ruben Moring, Partner at Translink Corporate Finance Finland, unveil a series of tech M&A trends expected to prevail in 2024. Irisson and Moring say, “AI and technology will continue to reshape corporate strategies and M&A in 2024. During the early stage of the pandemic, despite layoffs and macroeconomic uncertainty, corporations continued to make substantial investments in IT. This trend persisted throughout the pandemic and remains unchanged during the current downturn.”
AI will remain the co-pilot (for now)
Translink says some companies are turning to tech and AI to enhance efficiency and achieve growth with a leaner workforce in a competitive talent landscape. In an extreme example, the France-based office of Onclusive, an international media monitoring group, recently announced its decision to replace 217 employees with AI by June 2024.
However, these ‘strong moves’ tend to hide the truth that AI currently performs more of a supplementary role, much like a co-pilot. For example, it can help improve the quality and efficiency of a developer’s code, but it won’t replace the developer (yet). In the M&A universe, AI also plays an ‘assistant role’ in simplifying systems, synthesising information, and automating mundane tasks.
Irisson and Moring say, “AI’s advancement will not overshadow the irreplaceable qualities of advisors, such as their emotional intelligence, in-depth expertise, and big-picture understanding. Instead, AI will serve as a valuable co-pilot, augmenting advisors’ capabilities by accelerating time-to-market and mitigating human errors.”
Technology will influence M&A and create a talent challenge for CEOs
Translink says while companies continue to follow an acquisitive strategy in order to obtain specific assets, talent pools, and client bases, secure a foothold in new geographical markets or diversify their offerings, the AI and technology component will play an increasingly vital role in dealmaking as digital integration into products and services continues to expand.
“The impact of AI extends to employees who struggle to harness its potential and risk being left behind. To remain competitive in the job market, individuals must elevate their skills and master the ability to leverage AI to enhance their professional value. This presents a formidable challenge for CEOs. The right talent will be indispensable, therefore building a robust talent pipeline becomes paramount,” add Irisson and Moring.
Translink says in the past, companies took a reactive approach to filling positions as they required. Leading-edge corporations have transitioned from this reactive stance to an active, long-term perspective on human capital management and recruitment. They make forward-looking predictions, set goals, and develop roadmaps for talent acquisition and development, including upskilling and reskilling. This approach will extend progressively to smaller and mid-sized organisations.
The rise of the reinvented unicorns
In the late 2010s and early 2020s, countless tech companies achieved unicorn status, benefiting from a flood of easily accessible cheap capital. The global adoption of cloud solutions, expedited by the pandemic, led to substantial revenue growth. In conjunction with a low-interest rate environment, this facilitated fundraising and IPOs for growth-focused firms, propelling valuations to unprecedented levels. Translink says while it was an exhilarating period, the distinction between successful and unsuccessful companies became evident as the music stopped.
“The tide shifted with escalating inflation and interest rates, demanding that start-ups exhibit viable, profit-generating models to secure support. As underperforming tech unicorns step back, opportunities emerge for new players boasting targeted models and mission-critical, value-generating applications, thereby reshaping the industry landscape. Their products or services should also be resilient to obsolescence by emerging technologies. Examples are exemplary companies like Deel and ChatGPT, which generate substantial value for professional users and rapidly expand their user base and revenue,” add Irisson and Moring.
AI will accelerate due diligence and dealmaking
Translink says AI is primarily a productivity tool that can provide an initial analysis of data; it can (almost) draft reports, but it cannot be part of the negotiation phase. It can help accelerate the process by crawling documents, indexing, and identifying red flags. But ultimately, a human must take responsibility for accurate results. Relying solely on AI, driven by uniform algorithms and data, yields standardised outputs.
Irisson and Moring say, “Several companies and private equity firms use AI to find and screen prospective opportunities by testing metrics against their proprietary data from previous deals. This approach widens the scope of targets as AI spots opportunities that usually wouldn’t be considered. However, no company is relying on AI 100%. AI can assist with sourcing, screening, drafting documents and due diligence. However, the final decision-making authority still rests with a human, emphasising the irreplaceable significance of human relationships, judgment, and expertise.”
CEOs must balance short-term technology fixes with long-term strategic planning
Translink says CEOs need a deep understanding of these technologies and the ability to discern when to develop custom solutions, buy existing ones, or pursue them through M&A to integrate technologies like generative AI into their operations. This process requires a strategic long-term vision, allowing leaders to determine which business processes will benefit from AI and avoid wasting resources on unproductive applications.
In the short term, technological solutions should focus on optimising, expediting, and reinforcing internal business processes and decision-making. Irisson and Moring conclude, “CEOs must consider how their companies will remain relevant over the coming decades. At Translink, we stand at the forefront of this evolution, partnering with our clients to help them identify and capitalise on the emerging trends and technologies that will futureproof their organisations and shape the future.”