Technology M&A: Key Trends and Structuring Considerations

The technology M&A market showed signs of recovery in late 2025 and early 2026 from the lows of 2023 and 2024, driven primarily by high-value transactions rather than increased deal volume. Technology, particularly artificial intelligence, cloud infrastructure, and cybersecurity, continues to lead activity while legacy software businesses are challenged and regulatory scrutiny and changing technology diligence demands are reshaping deal execution.

Market Trends

Global deal value increased significantly in 2025 and early 2026, with capital concentrated in fewer, higher-quality assets. Strategic buyers remain competitive for scarce assets that enhance AI, cloud, cyber, data, or product capabilities, while financial sponsors are focused on platform consolidation, profitable software, infrastructure, and assets with clear value growth.

In the middle market, activity persists but is focused on companies with strong IP, recurring revenue, defensible data rights, and durable customer relationships.

AI and Deal Structuring

AI is redefining valuation and transaction structures. Buyers are acquiring not only products but also data, models, infrastructure, and talent—assets that can be difficult to validate and value during diligence.

Consequently, parties are increasingly using earnouts (which can be difficult to administer in AI deals), escrows, minority investments, joint ventures, commercial partnerships, model licenses, data-sharing arrangements, acquihires, revenue-sharing, and staged investments to manage risk and account for performance uncertainty.

Regulatory Environment

Regulatory analysis now must be built into deal strategy at the outset. Depending on the target’s products, customers, data, ownership, and jurisdictions, technology transactions may implicate overlapping antitrust, foreign investment/national security, sanctions/export controls, data privacy, cybersecurity, and AI-specific regimes.

These issues can affect structure, interim operating covenants, closing conditions, outside dates, reverse termination fees, information-sharing protocols, and post-closing integration plans. Even minority investments or data-driven deals may attract scrutiny, particularly in cross-border transactions, leading to longer timelines and greater execution risk.

Diligence and Documentation

Technical diligence has become critical alongside legal and financial review, with a focus on data rights (ownership and right to use data), IP and employee/inventor ownership, cybersecurity, open-source compliance, customer and revenue diligence, integration risk, and AI performance.

Transaction documents are evolving to address these risks through targeted representations (AI/data compliance representations), covenants (data processing and transfer and regulatory covenants), and economic mechanisms such as milestone-based earnouts, special indemnities, special escrows, and staged investments.

Additional Considerations

Controlling Stockholders

In most technology M&A deals, there are “controlling stockholders” (e.g., high-profile founders, serial entrepreneurs, superstar CEOs, venture capital investors) who dominate the corporate decision-making process for the sale, acquisition, merger, and other major transactions involving the corporation.

Controlling stockholders, whether through majority ownership or outsized influence and control over the business and affairs of the corporation (even with minority ownership), remain subject to heightened fiduciary duties including fiduciary owed to other stockholders, with recent Delaware legislative developments providing additional clarity and certainty through statutory amendment to Section 144 of the Delaware General Corporation Law.

Preliminary Deal Process and Misuse of Confidential Information

Misuse of confidential information during the preliminary deal process presents significant risk, both on the sell- and buy-side, underscoring the importance of strong safeguards, including post-termination handling of the target company’s confidential information and clean team protocols.

In reviewing an example from recent caselaw in California, there are important takeaways for technology companies on both the sell- and buy-side. Parties should be cognizant that more than 50% of deals are leaked before announcement and should work closely with corporate development and business teams to put in place best practices for managing confidential information, especially the most sensitive confidential information related to pricing, profit margins, and business plans of the target company.

Looking Ahead

Technology M&A is increasingly complex and diligence-driven. Successful transactions require early validation of key assets, proactive regulatory planning, and tailored deal structures to effectively allocate risk and capture value.

Key Takeaways

Deal activity is rebounding, but concentrated in fewer, higher-quality technology assets:

• AI is reshaping valuation and deal structures, with increasing use of earnouts and staged investments
• Regulatory scrutiny is expanding, including to minority investments and data-driven transactions
• Technical diligence is critical, particularly around data rights, cybersecurity, and AI performance
• Fiduciary duties of controlling stockholders should always be taken into account in M&A deals in the technology space, whether sell-side or buy-side
• Process risks (e.g., trade secrets misuse) require careful management through internal controls—especially post-termination—and use of clean teams