Two weeks into 2021 and the merger and acquisition (M&A) frenzy of last year already shows little sign of waning in Australia and New Zealand.
With global integrator Cognizant snapping up Australian data and analytics firm Servian and Infosys buying Carter Digital, the region’s channel could be set for yet another long wave of consolidation as vendors and partners alike pursue expansion and exit strategies.
In total, analyst firm Tech Research Asia (TRA) tracked 103 deals in Australia last year, a marginal decline from 2019’s 108, but evidently showing an upward trajectory from 2017 and 2018, when the numbers hit 86 and 90, respectively.
Privately, some channel leaders have raised fears to ARN about the impact of the rampant M&A within the A/NZ channel. These concerns in particular focus on whether there are enough local upcoming start-ups and technology companies to fill the gaps within an increasingly consolidated market.
As one vendor leader put it to ARN, vendors, especially those in traditional IT infrastructure and hardware, are already are fighting over an increasingly smaller pool of channel partners and talent. Further consolidation can only exacerbate this problem, the executive added.
However, Tech Research Asia analyst Mark Iles sought to downplay the idea that the A/NZ channel market is under risk of increasing shrinkage.
“There are new companies being spun up to address new market opportunities all the time and we don’t see any slowdown in that,” he said to ARN.
However, that is not to say there it’s necessarily plain sailing for any upcoming channel players in A/NZ, especially those in the software arena.
Funding is naturally a big issue for any budding technology player and although, as Iles acknowledged, the Australian government has made some steps towards this, most businesses startup with their own capital. This perhaps explains the proliferation of services focused businesses, which are, easier to spin up, the analyst pointed out.
During EDGE 2020, Hugh Richards of specialist trans-Tasman financial advisory firm TMT Partners said software – in particular, software-as-a-service (SaaS) – businesses are some of the most in-demand from buyers. As he explained during November’s virtual conference, SaaS company valuations have been growing consistently over recent years, but really accelerated during 2020.
However, as Iles explained, these are some of the harder companies to start in terms of funding. "The reality of starting a software business is the risks are greater as you need more seed capital to get going and before you can generate revenue,” he said.
“The start-up market here isn’t as buoyant as in other markets and that makes it hard to stand out in a crowded marketplace but there are investors out there – it’s just not as easy as in the USA.”
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