Data Infrastructure Companies Become Hot Targets in AI-Driven Tech M&A Boom

The Rise of Data Infrastructure in AI-Driven M&A

In a global market where dealmaking has slowed across most industries, the unglamorous world of data infrastructure has emerged as a hot spot for mergers and acquisitions (M&A). Legacy tech companies are scrambling to acquire firms that process data used in advanced AI models, aiming to stay competitive against AI powerhouses like OpenAI, Google, and Anthropic 1

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The Importance of Data in AI

Brian Marshall, global co-head of software investment banking at Citi, emphasizes the critical role of data in AI development: "AI without data is like life without oxygen, it doesn't exist" 1

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. This sentiment underscores the current "zeitgeist moment" for data in the AI-driven tech landscape.

M&A Market Trends

Tech deals have become a bright spot in an otherwise gloomy M&A market. According to data compiled by Dealogic for Reuters:

• Tech deals accounted for $421 billion of the $1.67 trillion in global deals announced in the first five months of 2023
• This represents about 25% of total M&A, up from 20% last year and 17% in 2021
• AI software makers accounted for almost three-quarters of the overall value in tech deals 1

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The Race for Data Infrastructure

Goldman Sachs Managing Director Matthew Lucas notes that enterprise data, as it applies to AI use, is currently the "most dynamic area in software M&A" 1

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. The perception that speed and being first to market are crucial is driving this M&A trend.

Recent High-Profile Acquisitions

Several multibillion-dollar deals have been struck or closed in recent weeks:

• Meta acquired a 49% stake in data-labeling company Scale AI for $14.8 billion
• Salesforce announced plans to buy data integration company Informatica for $8 billion
• ServiceNow acquired data catalogue platform Data.world
• IBM closed its acquisition of data management provider DataStax 1

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Potential Targets and Market Outlook

Investment bankers suggest that enterprise data infrastructure and analytics companies like Confluent, Collibra, Sigma Computing, Matillion, Dataiku, Fivetran, Boomi, and Qlik could become targets for legacy tech providers 1

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. The urgency to deploy effective AI solutions is making data infrastructure an existential concern for many enterprises.

The Importance of Quality Data

While the race to acquire data infrastructure companies is intensifying, dealmakers warn against indiscriminate data acquisition. Brian Mangino, partner at Latham & Watkins, cautions: "A lot of companies have a huge amount of data, but I think they're learning that you can't just funnel every piece of data you have into an AI engine with no organization, and hope that it spits out the right answer" 1

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Future Projections

According to technology data provider Gartner, worldwide generative AI spending is expected to reach $644 billion in 2025, marking a 76.4% increase from 2024 1

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. This projection underscores the growing importance of data infrastructure in the AI landscape and suggests that the current M&A trend is likely to continue in the near future.