M&A in the Technology Era
Technology today influences perhaps all sectors of the economy as well as our day-to-day lives. In an age when we all want everything to happen faster and easier, the need to develop various software programs, solutions, and applications has never been bigger, and there is great competition to bring innovations to the market. Naturally, the M&A market in the technology sector follows the trends of the sector itself.
Overcome Challenges for Great Opportunities!
The IT sector has become more and more relevant for Romania’s economy. At the declarative level, it has been elevated to a key sector. As a matter of practice, although some tax benefits have been provided, the sector still needs targeted, supporting measures. Romania clearly has a lot of potential in the area, as proven by the successful stories of entrepreneurs and specialists in the field, which should be used as a runway for overall economic growth.
The effervescence in the IT sector triggered a dynamic M&A market with projects ranging from small investments to mid-size or even large transactions. In particular, investors have shown interest in financing technology start-ups and seed or small-size businesses with big ideas that need funds to go global. While the reasoning behind such interest varies widely, from strategic investments to financial returns, business angels, venture capital funds, corporate venturing units, and private equity funds are all keeping an eye on the technology sector.
As lawyers, we are able to see the two faces of the coin. On different projects, we have acted both on the investors’ and on the entrepreneurs’ side. We have thus in our mind both perspectives and know their challenges.
For investors, one of the biggest challenges is quickly adjusting to and understanding the local business and regulatory environment. It is always (also) about speed in the technology sector, as the tech world can often have moved on by the time a decision is actually made. While amazing progress has been made by the local business environment in assimilating international M&A trends and concepts, it is not easy to keep pace with a continuously changing global market; therefore, the investor and the local entrepreneur may not always be on the same page when negotiating the deal.
For start-ups, access to funds is essential to go big and global. While this access has improved, Romania is still behind big technology hubs across the globe. One of the biggest challenges entrepreneurs face when attracting financing from foreign investors is about being aware of and understanding global trends in international markets. Absent this understanding, entrepreneurs might look to the M&A process from their perspective only, disregarding the investor’s reasons for proposing certain conditions for the investment, and ignoring market practice may lead to a rather long and painful M&A process. In the end, for timing reasons, the investment might not even happen at all. If young entrepreneurs benefit from corporate and business support earlier in the process, their chances of getting the funds they need quickly and in mutually advantageous terms will increase.
Keep an Eye on Agritech!
Technology is more and more about addressing needs across industries. In terms of a new focus, the mix of technology and agriculture in Romania is full of potential. However, despite the wealth of its agricultural land, Romania is last in the EU in terms of productivity. Facing the constantly increasing need for food combined with major climate changes and limited availability of agricultural land, the world is looking at innovative tools and technologies, particularly digital ones. The quality and quantity of agricultural production is increased using sensing technology to make farms more “intelligent” and more connected through so-called “precision agriculture” or “smart farming.” Traditional agriculture is no longer enough, and big farmers in Romania have started to look at new technologies to optimize the yield per unit of farm land. On a large scale, the process is definitely difficult and challenging. as costs are high and smaller, traditional farmers may be reluctant to embrace new technologies.
Certainly the transformation process has started. Young entrepreneurs in the technology field are willing to boost agriculture with their fresh vision for the future, and agri-tech will become a priority for years to come.