Technology, the new diamond of Portuguese mergers and acquisitions

Portuguese technology has entered 2025 in a big rush, with a wave of mergers and acquisitions (M&A) on a larger scale for what is common in the country. Deals such as Nos’ purchase of Claranet Portugal for 152 million euros, will certainly shake up the M&A rankings at the start of the year.

Last year, the Internet, software and Information Technology (IT) services sector was the second largest in Portugal, with a total of 70 deals, which catapulted the digital industry into second place in the table, only behind the undisputed real estate (105 transactions). There was an 18% reduction year-on-year, but this decrease was generalised across all sectors, in the context of the downturn in M&A.

The difference is that now there’s an ingredient to sweeten this recipe: Artificial Intelligence (AI). “According to a Bain survey of more than 300 M&A professionals in various countries, 21% are currently using generative AI during their processes, an increase of 16% compared to last year, and one in three anticipate using it by the end of the year. Although this technology is usually used more to find and validate deals, at Bain we estimate that generative AI could be used in all stages of an M&A process in the next five years”, says Álvaro Pires, partner at Bain & Company.

According to Paulo Morgado, former vice-president of Capgemini and partner at Antas Cunha in charge of the Technology Transactions area, portfolio diversification; expanding the client base; entering another geography; access to knowledge and talent; and scale and strategy are the six main reasons for technology companies to follow this path of consolidation.

“Through acquisitions, companies are quickly trying to diversify their offer. In other words, they are in sectors that can be considered more commoditised and more competitive and end up acquiring companies with relatively developed offerings in areas such as AI and cybersecurity and save resources on developing new products“, explains Paulo Morgado.

The specialist in M&A in the technology sector emphasises that mergers tend to dilute structural and indirect costs (marketing, legal issues, research and development), because “the larger the scale of a company, the more competitive it becomes”. “Buying to internationalise also reduces the time and costs of entry”, he adds.

The consultancy PwC carried out due diligence on one of these acquisitions to expand across borders: that of Boost IT and Hexis Technology Hub by the Danish company Emagine. Speaking to ECO, the director of Corporate Finance Advisory at PwC Portugal notes that the technology sector has been one of the most active in recent years, including in IT services, outsourcing and nearshoring.

“Portugal is a very attractive market due to the pool of highly qualified talent, competitive labour costs, companies with robust skills and geographical location, as well as the more innovative companies focused on software development. We expect this dynamism to continue as a result of the continuing trend towards consolidation on the part of the big European players, especially the French and Nordic ones”, says José Melo Guimarães.

In Paulo Morgado’s opinion, governmental options also have an influence on M&A, because they increase countries’ technological sovereignty. “In Spain, we saw the purchase of 10 per cent of Telefónica by the state, which then considered merging other technology companies. On the other hand, if we combine what happened last week, with the markets tanking because of China’s DeepSeek and its more efficient AI solutions, with Donald Trump’s statements warning American companies to position themselves on the front line and a certain inaction — and I’m being nice — in Europe, we can see the effect that these companies have on the power of countries”, explains the former CEO of Capgemini, advocating the creation of a strategy (cluster) for the IT sector, as was the case with Autoeuropa in the automobile sector.

Venture capital explains growth

“It’s a sector that has been very dynamic, also benefiting from the fact that there are many capital-raising deals. There are deals — the majority or at least a large part — that count towards these lists, which are VC [venture capital] rounds for capitalising companies. It’s a particular characteristic of this sector”, explains Pedro Brás da Silva, a partner at Deloitte Portugal specialising in Technology, Media and Telecommunications.

Despite the fact that the transactional market as a whole has seen falls in both the number of operations and the value, in 2024 there were 70 private equity transactions totalling 3.5 billion euros — 56% more than in 2023 — and 122 venture capital investment rounds, amounting to 886 million euros, which also represents double-digit growth (+55%) in the amount invested. “In the sense of mergers or strategic business intervention, I’d say it’s less than 20 per cent of operations”, he adds.

The Deloitte Portugal partner recalls that the peak of M&A in the post-pandemic period, around 2021-2022, was followed by falls motivated by geopolitical factors, such as the war in Ukraine, and high inflation. “It’s not that organisations weren’t willing to do the deals; they were. There was simply a difference in expectations of values and postponements”, says Pedro Brás da Silva.

In 2024, there was a revival of this type of operation and this year it is expected to continue. In fact, seven days before Nos went shopping, Portugal’s PHC Software, until then led by businessman Ricardo Parreira and based in Taguspark, surrendered to the second attempt by France’s Cegid, a European group of cloud programmes for managing companies’ finances, human resources and retail, after a first takeover attempt in 2022. “In the meantime, we’ve seen an upturn and now there’s stability. I wouldn’t say it’s a great exuberance, despite the purchases of PHC by CEGID and Claranet by NOS. Those end up being important”, admits Pedro Brás da Silva.

Even more important was the purchase of Vision-Box, which does online border control with biometrics, by the giant Amadeus, for 320 million euros. The amount paid was more than double the Nos/Claranet deal and was enough to move the needle on M&A in the sector.

To prevent deals like this from falling through, José Melo Guimarães, director of Corporate Finance Advisory at PwC, offers one piece of advice: “It is essential that entrepreneurs in the sector prepare themselves for the sale process in order to avoid the appearance of contingencies during the buyers’ analysis processes, which often result in significant adjustments to the valuation assigned and the consequent breakdown in the negotiation”, warning of the “high” number of transactions that end up not materialising due to the unpreparedness of the companies, which are growing rapidly.