TMT and digital infrastructure – AI drives activity

2024 saw an overall increase in deal value from $570 billion in 2023 to $780 billion. The increase in deal value was driven by activity and sizable deals in the US, although there was a decrease in deal numbers in 2024 globally when compared to 2023. The continued demand for digital transformation, the rise of AI, automation, cybersecurity and decarbonisation, combined with macroeconomic factors such as the US administration's focus on deregulation (which is likely to have a global ripple effect) and potential interest rate cuts by central banks worldwide, are expected to drive significant deal-making and investment in 2025.

Key themes

From an overall TMT perspective, technology and AI emerge as the main drivers of M&A activity in this sector. Numerous companies are making substantial investments in these areas, which are set to propel M&A activity. Significant activity in the US is forecasted to persist through 2025, as exemplified by Softbank's commitment to a $100 billion investment in the US over the next four years, focusing on technology and AI. Over in Asia, China is spearheading the technology M&A scene, bolstered by strong innovation and policy support for AI, alongside the pioneering introduction of DeepSeek's AI models. For more on AI and M&A see our AI piece.

Another area brimming with M&A activity is the digital infrastructure realm, especially in the development of data centres, and to a lesser extent, tower assets. Activity continues in the UK and Europe, albeit at reduced levels for tower assets. Presently, data centres are the most sought-after asset class in the telecom and digital infrastructure sectors. Private capital investors, armed with record levels of capital, are increasingly investing in data centres, viewing them as stable, long-term assets amid economic uncertainty. These investors, along with major tech companies, are notably setting the pace for M&A opportunities in data centres and related energy infrastructure. There is a broadening appeal amongst investors for data centre opportunities powered by renewable energy or aligned with ESG agendas. However, this typically results in an increase in expected valuations or higher EBITDA multiples. Amid these swift developments, two critical trends emerge – power grid connectivity and planning challenges. The scale of these developments and their associated environmental impacts, particularly in green belt areas, can make data centres contentious among communities and local governments, posing further challenges to secure planning permissions.