The appetite for tech deals will return in 2023, despite adverse conditions

Faced with high inflation, an energy crisis and falling consumer confidence, the biggest opportunity for tech companies in 2023 is to adopt an active mergers and acquisitions (M&A) strategy – according to an annual EY report, Top 10 opportunities for technology companies in 2023. As valuations come down, the appetite for deals is set to return next year. This is supported by a recent EY study, which finds that 72% of tech CEO respondents plan to pursue M&A in the next 12 months, compared with 59% of CEO respondents across all industries.

Iulia Bratu, Partner, Head of Lead Advisory, EY Romania: “Technology was the No. 1 sector for Romanian M&A in 2022, representing around 20% of the total number of deals and being mainly driven by inbound transactions. Furthermore, technology is the leading sector in M&A activity for the cumulative period 2018 – 2022. While transaction values remain mostly undisclosed, the strong historic trend and expectations that global activity will increase in 2023 can only indicate an even more positive outlook for Romania.”

Supply chain makeover

Improvements in the supply chain over the last few years have been thwarted by a decline in the political, economic and financial climate. In third place on this year’s ranking is the opportunity for tech businesses to reduce their dependency on geopolitically unstable geographies by doubling-down on localization. And tech executive respondents are on board, with 78% now planning to decouple their supply chain – including nearshoring and reshoring.

Retain top talent

The opportunity for businesses to build an agile talent strategy is at ninth position on the ranking. Up until a few months ago, the biggest workforce challenge for tech businesses was “The Great Resignation.” Driven by a re-alignment in work priorities during the COVID-19 pandemic, 56% of employee respondents in the sector indicated that they were considering leaving their current role in the pursuit of higher pay, better wellbeing programs and new career opportunities. Today, the sector is not only dealing with talent shortages to fuel long-term growth, but also with hiring freezes and layoff rounds in response to economic uncertainty.

Sustainability reporting and edge computing

The report further predicts that environmental sustainability (fourth position in the ranking) will impact the tech sector in 2023 more so than in previous years, as companies adapt to comply with incoming regulation on disclosure around emissions and climate change risks. And a new entrant in seventh position is the potential for edge computing to reach maturity in the next 12 months for those businesses that are willing to invest in new IT architectures.

The full list of top 10 opportunities in technology for 2023 are:

1. Accelerate M&A strategy execution to strengthen growth profile
2. Experiment with platform ecosystems to disrupt the market
3. Double-down on localization, even if it comes at a cost
4. Prioritize environmental sustainability
5. Introduce pay as you go to attract complementary revenue streams
6. Leverage analytics tools to optimize revenues
7. Invest in edge ecosystem to improve operations and experiences
8. Cyber, cyber, cyber … ensure data protection
9. Drive an agile talent strategy to match resources with company need
10. Prepare for global minimum tax reform