Navigating the Future of Technology Investments: M&A Trends and Challenges for PE Firms

2025 is shaping up to be an exciting year for M&A activity in the enterprise technology space—and mid-cap private equity (PE) firms have an opportunity to capitalize on emerging trends. After a period of uncertainty in 2024, favorable economic conditions and the resolution of global political tensions are setting the stage for a surge in deals. But with every opportunity comes a set of challenges. So, how can PE firms take advantage of these dynamics and unlock growth potential?

Here’s what you need to know to stay ahead of the curve.

1. AI: The Driving Force of Deal-Making

AI isn’t just a buzzword anymore; it’s becoming the backbone of many transformative M&A deals. Take IBM’s $6.4 billion acquisition of HashiCorp (bought to enable AI )or MongoDB’s purchase of Voyage AI—these moves are all about harnessing AI to drive innovation and operational efficiency. For mid-cap PE firms, this trend represents a massive opportunity to invest in cutting-edge technology that can fuel growth across portfolios.

However, AI also brings a challenge: integration. As AI becomes more central to business operations, the ability to weave these technologies into existing systems will be critical. The winners will be the firms that not only identify AI-driven opportunities but also have the know-how to integrate them seamlessly.

2. Scope Over Scale: Focus on Diversification

Unlike traditional M&A deals that are often about increasing scale, the big tech mergers of 2025 are focusing on scope—broadening product portfolios and entering new markets. Bain & Company’s report highlights this shift, noting that almost two-thirds of billion-dollar tech mergers in 2025 are centered on expanding product offerings, rather than just growing in size.

For PE firms, this means looking beyond the size of an acquisition. The real value lies in identifying companies that complement existing portfolio assets and open the door to new revenue streams. By cross-selling, expanding market reach, and integrating AI to drive efficiencies, these deals can deliver massive synergies. But, aligning sales strategies and operations across these acquisitions will require careful planning and execution.

3. Regulatory Challenges Are Real: Be Prepared

As AI continues to evolve, governments worldwide are putting increasing scrutiny on cross-border transactions, especially in Europe. Regulations are tightening—particularly around AI and data privacy—making compliance more complex for global deals. The increased focus on AI’s role in national security will add another layer of scrutiny to cross-border M&As.

For PE firms, this means navigating an increasingly complex regulatory landscape. Staying ahead of new compliance requirements is essential to avoid delays, roadblocks, and potential legal hurdles. Deals that cross borders, especially those involving AI, will require close attention to regulatory considerations from the outset.

4. Private Equity’s Growing Influence: Capital and Competition

PE firms are sitting on record amounts of capital, and the appetite for tech deals is higher than ever. As competition for quality assets heats up, mid-cap firms need to be agile, smart, and strategic in their investment decisions. But this competition also brings opportunities.

The growing trend of acquiring for scope rather than just scale means that PE firms can position themselves to make smarter investments in tech companies that complement their existing portfolios. The key is to act quickly and thoughtfully—acquiring businesses that align with long-term growth strategies rather than simply adding more to the pile.

5. Post-Acquisition Success: The Real Work Begins

Even the best acquisitions can falter if integration isn’t handled with care. As AI and other technologies become more central to business operations, integrating them into the acquired company’s processes will be complex. Additionally, ensuring that sales teams, cultures, and operational strategies align post-deal will be essential for unlocking the full value of the acquisition.

For PE firms, post-acquisition execution will be where the real value is realized. Focused integration planning, with an eye on maximizing synergies through cross-selling and operational efficiency, will be key to achieving success.

The Bottom Line: Seize the Opportunity, Embrace the Challenge

2025 is shaping up to be a pivotal year for M&A. For mid-cap PE firms, the opportunity to capitalize on these trends is enormous—but success won’t come without its challenges. Understanding the importance of AI, focusing on strategic scope rather than just scale, navigating regulatory hurdles, and executing post-acquisition strategies will be essential to delivering returns in this competitive market.

In the fast-moving world of tech M&As, the firms that can move quickly, integrate effectively, and align on strategy will emerge as the leaders.