Tech M&A: an arms race for compute and power

July 2026  |  FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2026 Issue

Despite significant uncertainty over the past few years, 2025 was a notable year for M&A activity, with a further surge in dealmaking in the first quarter of 2026. According to S&P Global, M&A volumes rose to $861.1bn in Q1 2026, marking the strongest start to a year since 2021 and a 9.7 percent increase on Q1 2025.

One of the core drivers of deal activity in recent years has been the technology sector. Despite economic and geopolitical headwinds, tech dealmaking remained strong in 2025, driven by strategic acquirers taking decisive steps to improve their positioning in a rapidly evolving market and private equity (PE) sponsors undertaking transactions of a scale not seen since 2007, according to Cooley. Tech M&A increased by 36 percent and 9 percent year on year in 2025 by deal value and volume respectively, with more than five $10bn-plus transactions announced.

According to Cooley, several factors are driving this heightened activity, including increased dealmaker confidence supported by a more predictable regulatory review environment, rising markets and ample availability of acquisition financing.

Capital flows into software and AI ecosystems

Another notable feature of the tech M&A landscape has been the focus on software and AI infrastructure. Many acquirers appear to have learned lessons from previous phases of technological development. As seen during the rise of the internet, the buildout of the cloud and other recent technological shifts, investing early while technologies remain relatively nascent and adopting appropriate deal strategies can position companies to differentiate themselves from competitors.

This trend has become increasingly evident over the past 12-18 months, as large technology companies have expanded capital expenditure plans for artificial intelligence (AI)-related infrastructure, including cloud and data centre capacity. In 2025, Microsoft, Amazon and Alphabet each announced plans to increase AI capital spending to approximately $80bn, $100bn and $80bn respectively.

Much of this investment is likely to remain concentrated in the US, reflecting the presence of leading technology firms, established cloud ecosystems and deep capital markets. Although investment will continue in China and other jurisdictions, the US is expected to remain the primary arena for large-scale AI-related deal activity for the foreseeable future.

Sovereign wealth funds and PE have, and will continue to, play an important role in the technology arms race in the coming years. In 2025, the largest sponsor-led take-private in history was announced – the $55bn acquisition of Electronic Arts by a consortium backed by sovereign wealth and PE investors.

This was not an isolated transaction. Dayforce was taken private in a $12.3bn deal by Thoma Bravo, while Swedish software as a service provider Fortnox agreed to be acquired by a consortium led by EQT and its largest shareholder, First Kraft. Similar transactions are expected, supported by the scale of dry powder available within PE and continued investor demand for mature businesses with resilient revenue streams or opportunities to expand within the broader technology sector.

Applying discipline in a fast-moving deal environment

For investors and corporate acquirers considering transactions, previous technology cycles – particularly the dotcom era – offer valuable lessons. Long-term success is often found in companies built on resilient infrastructure and robust operational efficiency.

As demonstrated by companies that emerged strongly from the dotcom era and other technology booms, the combination of sound systems and scalable economic models remains critical. Today’s most attractive AI targets are those with differentiated capabilities, such as energy-efficient data centres, proprietary data pipelines and optimised hardware that can support growth without unsustainable cost structures.

Agility is also an increasingly important factor. The AI landscape is evolving at exceptional speed, with open-source models and evolving monetisation strategies reshaping competitive dynamics. To respond effectively, acquirers must adapt to these rapid changes. In this environment, traditional acquisition models may struggle to keep pace, requiring more flexible approaches. These may include minority investments, strategic partnerships and acqui-hires.

Such flexibility is closely linked to valuation discipline. Acquirers must strike a balance between innovation and disciplined pricing in this evolving deal environment. Rapid developments in AI can create pressure to secure access to promising assets quickly, yet competitive intensity during technology booms can lead to overpayment, ultimately eroding long-term value.

While speed is often necessary in a fast-moving market, innovation alone does not justify inflated valuations, particularly in a sector such as AI where business models, regulatory frameworks and monetisation pathways are still developing.

Accordingly, potential acquirers should remain disciplined and focus on assets capable of sustainable scaling, defensible differentiation and operational efficiency. This places significant emphasis on due diligence. Acquirers must assess not only the quality of the target asset but also factors such as infrastructure costs, data governance, intellectual property and post-close integration feasibility.

By combining strategic ambition with financial discipline, acquirers are more likely to secure meaningful competitive advantages while protecting shareholder value as AI markets mature.

Given the pace of change in the technology sector, the M&A arms race is expected to intensify in the coming years. As companies seek to distinguish themselves in an increasingly competitive environment, maintaining discipline and applying lessons from past cycles will be critical to building sustainable advantage.

© Financier Worldwide

BY

Richard Summerfield