Behind the deals: what’s driving the industry’s record M&As?

Oscar Werner, Sinch CEO

So far, 2020 has been full of surprises, but not all have been bad.

In April, new data emerged confirming the value of data centre related merger and acquisition deals closing in the first 16 weeks of 2020 had already surpassed that of the 2019 total, despite the Covid-19 pandemic.

This record activity has seen some interesting developments emerge, including the largest ever data centre transaction: Digital Realty’s $8.4 billion acquisition of Interxion.

At Sinch, three acquisitions have been announced to date: Wavy in Brazil, Chatlayer in Belgium and SAP Digital Interconnect (SDI) – all since Covid-19 lockdowns commenced.

CEO Oscar Werner says there are multiple forces driving the wider trend of market consolidation.

“The technology shift to a more SaaS style product offering is certainly a driving force. Being able to keep up with investment requires a certain size. Noting the influence of this on the industry he adds: “Larger companies in this space will get a lot of power to invest in new SaaS solutions and will thereby gradually be more competitive.”

“Another force is the globalisation of customer needs. As the market becomes more mature, enterprises are rationalising their purchasing decisions and rather buy from fewer but stronger players,” he continues.

With Covid-19 pushing a parallel trend for companies to become more competitive, it’s unlikely the pace will slow anytime soon.

“Large enterprises are looking for scale and quality. This is creating opportunity for Sinch to present products and solutions to these companies that perform through mobile carriers all across the world. It’s more efficient for the enterprises to find a partner that can deliver in many, many locations around the globe,” says Werner.

The pandemic’s impact can’t be ignored and Werner predicts consumer behaviour will likely be a deciding factor in what direction things take over the short to mid-term.

“Are we going to continue doing more e-tailing when the shops open? Are we going to fly less? Are we going to be doing more video meetings? All of these things will have a bearing on how the industry is shaped in the months and years to come,” he says.


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However, Covid-19 has been the great leveller when it comes to technology. Those with “future-proofed” capabilities made a relatively seamless transition to remote operations, while others have had a more difficult time.

As the pandemic continues to accelerate the digitalisation of the global economy, Werner suggests a gulf could emerge between the digital haves and have nots.

And on the inevitable financial downturn?

“We are trying to understand how it will impact players like us. But bottom the line is this industry is about communication, and especially communication based on cloud-based technology. We believe that the fundamental need for many of the services will be there for the long run,” he adds.

Driving results

Sinch was founded in response to the market’s move towards cloud-based platforms over bespoke in-house solutions, for both B2B and B2C communications.

Over the last 12 years, the customer base has evolved from a full dependency on email to favouring more instant means. When information is sent via text for example, Werner says it is realistic to expect a 98% open rate and 90% read rate within two minutes.

“It’s unprecedented. It’s unbeatable and it beats email hands down for short time-critical messages,” he comments.

Now the constraints of character limits are a thing of the past, “app-like” experiences are the standard, using rich messaging services. Today, the SaaS, or CPaaS market for messaging, voice and video services has quickly grown into a $70 billion industry.

“Enterprises can do so much more and drive so much more value to their consumers. On the basis of this, we believe the market will grow significantly over the coming years. It will also be more complex since the new channels require more software to operate effectively. As a result, the market is moving to more SaaS style characteristics,” Werner says.

In house, Sinch is focused on the continued development of conversational messaging capabilities, bringing together AI and natural language processing to empower businesses to “embrace richer, more conversational communications with their customers.”

In geographic terms, Werner says future growth is focused on building leadership in the core markets of the US, Europe and Latin America, with Asia growing in importance “as time goes by”.

Of course, there are also plans to leverage full potential of the newly acquired SDI, including its customer base and relationships with several of the world’s most well-known brands and on the back of the deal there will also be a focus on “enhanced solutions” for mobile operators.

“Because of the SDI transaction, we also now have access to some very interesting new offerings,” Werner reveals.

Then there is the team. Paying tribute to “great people and expertise”, Werner says: “By bringing two great teams together, there’s a lot we can learn from each other, which ultimately means we can offer better service to our customers.”

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