What will 5G mean for the future of M&A?

MGMT3D > What will 5G mean for the future of M&A?


Over the past couple of weeks, the airwaves have been flooded with news regarding the ongoing U.S. ban of Chinese telecom giant and 5G pioneer Huawei. While the current ban might have slowed down the implementation of 5G in the U.S. slightly for now, it is only a matter of time before the blazing-fast next-gen networks begin to roll out.


5G is set to be one of the most game-changing technological advancements of the decade. With speeds up to 100x faster than 4G it will make ultra-high-speed internet – measurably faster than most current Wi-Fi networks – available over the airwaves.


To put that into perspective, downloading a 2-hour film on a 4G network now takes about 6 minutes. On a 5G network, that time will be cut down to a mere 3.6 seconds. While this will be nice for browsing the internet on your cell phone, the implications are much, much bigger.


The ultra-fast connection speeds will open the doors to mass implementation of technologies for applications that never seemed possible, in places that never seemed possible. Devices connected over the Internet-of-Things (IoT) already outnumber humans on the planet 4-to-1, and that number is set to grow exponentially with 5G unchaining IoT hardware from the shackles of Wi-Fi range limitations. Last year, nearly 54,000 standard essential patents were filed for 5G-related technologies, so if you think the world is full of smart technology now, just wait a couple of years.

So, what does that mean for PE firms? According to the most recent EY Private Equity PE Pulse Report, “With themes such as cloud computing and mobility now mainstream, PE firms are focusing on the next wave of disruption — technologies such as artificial intelligence and machine learning, robotic process automation (RPA), Internet of Things (IoT), robotics, drones, blockchain, augmented reality and virtual reality.”


With 5G increasing the connect-ability, visibility and capability of these technologies, disruption becomes even more of a sure bet. Autonomous vehicles, which require a continuous stream of data, will see a boon from 5G. That includes not only self-driving cars, but drones, agricultural equipment, and larger vehicles used for freight transport. The push for faster last-mile logistics in the retail space is already pressing the need for automated transportation options like drones and self-driving delivery vehicles, and with billions of dollars at stake, the potential for innovative new companies to rise is virtually limitless.


Connected industrial equipment will also be a growing sector. At the Mobile World Congress event in February, SK Telecom demonstrated what 5G-connected manufacturing might look like. The demo showcased how much more powerful the sensor technology could be with increased data transmission capabilities, using robotic cameras to monitor for defects and increase production efficiency. Increasing production line visibility and efficiency is always the goal, and if it can be accomplished with a fixed cost with sure ROI, you can bet manufacturers will be ready to jump on it.


Healthcare is another sector where growing IoT impact will, no doubt, be felt. Everything from fitness trackers to advanced disease monitoring equipment can benefit from 5G. According to a study by Anthem, wearable health monitoring technology is predicted to decrease hospital costs by 16% over the next five years. Right now, the technology is severely limited by the data capacity of current networks. With 5G, that will no longer be an issue.


In all of these sectors, entrepreneurs with big ideas and big dreams will be out looking for the influx of cash that comes with selling a stake of the business to a PE firm. But not everyone can be winners. Our Diligent software can help you figure out if a promising tech company is what they say they are, by digging deep into their numbers to see their track record of profitability. Plenty of entrepreneurs have good ideas. Fewer have the business acumen to turn a profit with them. We’ll help you separate the wheat from the chaff.


As 5G begins to roll out, there is going to be a constant race to market with these new technologies. In many cases, tech companies may be looking to move quickly in the sales cycle. Getting a complete financial picture of the potential investment quickly by having great software supporting your diligence process will give you a leg up when the opportunity arises.


What do you think about the economic potential for 5G technologies? Which sector do you think has the most potential for growth? We’d love to hear what you think. Sound off on social media now and join the conversation.