Tech sector M&A outlook: Strategic insights for 2025 & beyond

The technology sector remains one of the most active and strategically important areas for global mergers and acquisitions.

As we move through the second half of 2025, dealmakers are navigating a complex environment shaped by AI innovation, macroeconomic uncertainty, and shifting geopolitical dynamics. This article explores the key trends influencing tech M&A today, their implications for acquirers, and what the landscape may look like in 2026.

Current market trends – advancements shaping the industry today

Mid-market deals take centre stage - One of the most notable shifts in tech M&A is the pivot away from large-cap, high-risk acquisitions toward mid-market transactions. These deals typically involve companies with stable cash flows, strong customer retention, and scalable business models. While the overall number of deals has increased, the total deal value has declined, reflecting a more cautious and selective approach by acquirers. This trend is driven by both strategic buyers and private equity firms seeking lower-risk opportunities with clearer paths to integration and return on investment.

Surging demand for AI-native and infrastructure software - Artificial intelligence continues to dominate the tech investment narrative. Companies that are AI-native (meaning their products or services are built around AI capabilities) are commanding premium valuations. Infrastructure software, including cloud platforms, developer tools, and vertical SaaS solutions tailored to specific industries, is also in high demand. These businesses offer recurring revenue models and are often deeply embedded in their customers’ operations, making them attractive acquisition targets. We are witnessing an AI capex surge, with over $1 billion per day being invested in AI-related infrastructure, research and development, and strategic acquisitions; this surge is not only about expanding capabilities but also about securing control over critical components of AI (including semiconductors and data centres).

Interest rate sensitivity and financing dynamics - The macroeconomic environment remains a critical factor in deal-making. With expectations of interest rate cuts and regulatory easing, buyers (particularly those reliant on debt financing) are re-entering the market. Lower borrowing costs could unlock more deals. However, uncertainty around financing continues to influence the timing and structure of transactions.

Portfolio realignment and strategic divestitures - Many tech companies are actively restructuring their portfolios to focus on core growth areas such as AI, cloud computing, and data infrastructure. This has led to a wave of divestitures, particularly in telecoms and media, where legacy assets are being spun off or sold. These moves are creating opportunities for investors to acquire undervalued assets with turnaround potential.

Strategic vs. financial buyers - Strategic acquirers are increasingly focused on long-term synergies, integration potential, and operational fit. In contrast, private equity firms are targeting high-growth segments like AI infrastructure, often employing roll-up strategies to build scale. Understanding the motivations and criteria of different buyer types is essential for anticipating deal flow and exit opportunities.

Implications for tech investors

Strategic fit over scale - The evolving tech M&A landscape presents both challenges and opportunities for investors. The shift toward smaller, more strategic deals means that identifying high-quality targets is more important than ever. Investors should prioritise companies with strong fundamentals, drive innovation, and clear paths to profitability.

AI as a strategic driver - AI-native companies are no longer niche but remain a core driver of deal strategy. Whilst these are particularly attractive, they often come with elevated valuations. For those with a longer investment horizon, these businesses offer significant upside potential.

Timing is critical - anticipated improved financing conditions (including the reduction of interest rates) could lead to valuation uplifts, meaning investors could face higher competition, making early entry advantageous; early engagement with targets and proactive capital planning will be key.

Divestitures as a source of value - Portfolio restructuring across the tech industry is creating opportunities to invest in divested assets that may be undervalued but strategically important. Equally, corporate spin-offs and divestitures are creating a rich pipeline of acquisition opportunities; these assets often come with established customer bases and proven technology but may require operational improvement or strategic repositioning.

Geopolitical influence – Geopolitics and supply chain considerations are increasingly influencing M&A strategy and investors should monitor cross-border transactions and onshoring trends, especially in sectors like semiconductors and AI hardware.

Exit strategy - Understanding the exit landscape is key; strategic buyers may offer premium valuations for companies that fit well within their ecosystems, while private equity firms may pursue operational improvements and scale through consolidation.

Most promising tech Sectors for investment

As ever in recent predictions, AI and machine learning continues to have high-impact across industries, with focus on generative AI and infrastructure. Cybersecurity is set for continued growth, driven by evolving threats and demand for advanced security solutions. We envisage that clean energy and storage will continue to expand due to increasing pressure on climate goals and energy security. Another hot sector on radars is advanced manufacturing and robotics, with automation and smart factories looking to address labour shortages and supply chain needs.

As we look ahead, staying abreast of the latest technology trends is crucial for businesses aiming to remain competitive and innovative. By understanding and leveraging these advancements, companies can position themselves for sustained growth and success in an ever-evolving M&A market.

What to expect in 2026

For M&A professionals, 2025 is a year of strategic recalibration. The focus is shifting from scale to fit, from speculative innovation to infrastructure, and from reactive dealmaking to proactive portfolio shaping. As we approach 2026, those who align their acquisition strategies with long-term technological and geopolitical trends will be best positioned to create value and drive transformation.

Looking ahead, several trends are expected to shape the tech M&A landscape in 2026:

• return of larger strategic transactions - As interest rates ease and macroeconomic conditions stabilise, we may see a resurgence in large-cap deals, particularly among cash-rich tech giants seeking transformative acquisitions (including the anticipated acquisition of Mistral by Apple).
• AI infrastructure consolidation - The race to build AI-driven computing power will continue, with consolidation expected among infrastructure providers, semiconductor firms, and data centre operators. Strategic buyers will seek end-to-end control of the AI stack.
• increased cross-border activity - While geopolitical risks remain, clarity around trade policies may unlock cross-border M&A, especially in regions investing heavily in AI and digital infrastructure.
• focus on ESG and energy efficiency - Sustainability will become a more prominent factor in deal evaluation. Acquirers will prioritise targets that contribute to energy efficiency, clean tech integration, and ESG compliance, especially in data-heavy sectors.
• media and telecom transformation - AI is reshaping media and telecoms, with emerging platforms challenging legacy players. Expect continued consolidation, divestitures, and acquisitions focused on AI-enabled content delivery, advertising, and infrastructure