However, this situation does not apply to all companies, as there are huge technological companies that occupy the art of “riding crisis” and see in the recession an “exceptional opportunity” to pounce on the bodies of the startups of startups that the recession will crush.
Dr.
In an interview with “Sky News Arabia,” academic Karim Al-Omda, an Egyptian lecturer and professor of economics, claimed that recent years have seen an increase in acquisition activity, particularly by technological companies. A sort of momentum of this trend began in 2020 and persisted until the first months of the year 2022, when we witnessed a significant deal in which Microsoft acquired the company “Activision Plzrd” for $ 68 billion.
7 billion, which will be followed by the disclosure of Elon Musk’s unsolicited attempt to buy Twitter for $ 44 billion.
The mayor claims that as a result of the US Federal Reserve’s aggressive action in raising interest rates to combat inflation, the market environment changed, negatively affecting and to some extent disrupting the flow of technology acquisitions. This indicates that investors are moving their funds toward US Treasury bonds, while businesses are concentrating on the impact of the stagnation brought on by the fight against inflation on their operations.
The mayor emphasised that the impact of the recession differs from one region to another and from one company to another, noting that some major technological companies do not give the high interest rate the utmost importance because it is intended to carry out acquisitions to control a larger share of the market. As a result, they take advantage of the recession period and turn it into an opportunity to carry out their plans.
According to financial analyst Ali Al-Enezi, the technology sector’s acquisition momentum will not continue as it did in the previous stage and is instead predicted to experience a condition of calm and retreat over the coming years.
Al-Enezi points out that increasing interest rates have a significant impact on acquisition deals, which are typically funded by banks. As a result, financing for businesses becomes more expensive, and even those with the cash necessary to close a deal will struggle to agree on a price in choppy markets. As a result, when the economy is in a recession and interest rates are rising, fewer purchases are made.
Al-Enezi noted that the technology sector is a promising one and played a significant role in maintaining life in some way during the spread of the Corona pandemic; however, this year’s performance of technology shares was poor according to American indicators like “Dow Jones” and “S&P,” and this was due to its link to the current economic climate, the recession, and the intention to raise interest rates once more.
Are acquisition agreements in the IT sector being restricted by the recession?
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