Why TMT remains private equity’s most compelling vertical

The technology, media and telecommunications sector (TMT) has become the clear focal point for private equity (PE) investors, driven by its resilience, scalability and central role in business transformation. TMT which has long been an important destination for PE investment, has seen its position further strengthened as shifts in the global digital landscape reshape markets and value creation priorities, with 58% of PE investors now identifying TMT as their most frequently targeted sector globally for investments.  

Three sub-sectors, one unifying force 

While often cited as one sector, each branch of TMT has its own dynamics, deal structures and growth drivers. However, what unites them and what makes TMT such a powerful PE investment thesis, is digitalisation. Across almost every industry, whether it be banking, insurance, manufacturing or the public sector, the conversation surrounding investment always includes an element of technology when PE firms assess growth strategies and future value creation.  

As more sectors modernise their infrastructure, adopt cloud-based platforms and automate their operations, the demand for businesses that enable that transformation continues to compound. This makes TMT not just an attractive vertical in isolation, but one that feeds off the growth of every other sector and underpins demand for TMT assets within PE portfolios. 

Tech companies have essential structural qualities that make them attractive for investors: high recurring revenue, strong margins and genuine scalability. TMT businesses, historically software and SaaS but increasingly media companies that hold or leverage data, tick all of these boxes in a way that few other sectors can from a PE ownership perspective. Revenue growth in TMT has consistently outpaced other sectors, with margins running several percentage points higher as well. These are not just attractive characteristics on a spreadsheet, they are the foundation of real, defensible value creation that aligns with PE return expectations.  

The AI effect: broader than many realise  

Much of the excitement around TMT right now is being driven by artificial intelligence (AI), with over half of executives citing AI as the most influential trend shaping their businesses. While AI-native businesses and cyber security firms are attracting significant investor attention, the real story is broader. The infrastructure required to support AI’s growth including the power grid, data centres, chip supply chains, networks and vertical software platforms represents an increasingly wide ecosystem of technology organisations that PE firms are actively investing in across their portfolios. 

That universality means investors are not making a niche bet when prioritising investment in AI, instead they are positioning themselves at the centre of a structural shift with wide-scale impact. Additionally, AI is also shaping new conversations around productivity and the future of the workforce. Although AI is often viewed as a potential threat to employment, many TMT executives are increasingly approaching AI adoption as an opportunity to enhance operational value, rather than framing it solely as a disruptive force. This view is supported by the fact that 65% of TMT executives state that AI has already created jobs in their businesses.  

Deal activity in TMT: from pent-up demand to renewed momentum 

After a period of lower dealmaking activity, the market has shifted. There is a strong appetite for quality TMT assets among PE firms and that appetite is translating into action. Many organisations spent 2025 getting their affairs in order, focusing on AI adoption and implementation, capital expenditure, operational efficiency and are now ready to transact. The result is increased demand that is washing through the TMT sector as PE activity increases. In the UK specifically, the political and economic environment has stabilised relative to recent years and there are clear market indicators allowing companies to move forward with confidence.

In terms of how deals are being considered  there are two clear patterns emerging, if PE firms feel they already have strong platforms in their portfolio. , then they will look to bolt-on complementary technologies and related businesses to  plug into those current offering and scale further.  

For those with riskier portfolios or maybe tracking slightly behind, investment into new technology for existing portfolio companies is a key lever for ensuring they stay competitive and can generate better returns in the future. 

Valuations, exits and the rising role of compliance 

TMT assets command the highest valuations of any sector and that premium is not softening from a PE standpoint. Multiple expansion has been a significant driver of value creation in the sector, with TMT multiples rising faster than in other verticals.  

Strategic buyers are very active and the pipeline of potential IPOs is building. As AI giants like Anthropic and OpenAI teeter on the precipice of going public, the exit environment for other TMT companies is strengthening in anticipation as firms look to unlock liquidity and recycle capital. 

As technology regulation evolves globally, PE firms find themselves having to adapt. While compliance concerns are rarely deal-stoppers, due diligence processes must adapt to identify anything that could impact value or returns from a private equity risk and valuation perspective, with AI regulation and data governance increasingly considered earlier in investment processes. In the U.S., the GAIN AI Act, a bipartisan bill related to the acquisition of advanced AI chips, is worth watching, especially as chip availability and the supporting supply chain becomes an increasing concern in the TMT sector. 

Data is the asset; AI is the accelerator 

Ultimately, the businesses that own or leverage proprietary data are where the real value sits for PE investors. AI is a powerful tool, but it is only as valuable as the data that underpins it. Businesses that have built defensible data assets, whether they are in vertical software, managed services or digital infrastructure, they are the ones attracting the most serious interest and the highest valuations within investment strategies. 

AI may be the focus, but TMT as a whole stands to benefit 

There is still a healthy “trust but verify” approach when it comes to AI’s capabilities and rightly so. However, the broader picture is one of genuine excitement among PE firms and strategic investors as they are at the forefront of figuring out how to combine technology assets, data and operational expertise in ways that generate maximum impact. The market is evolving quickly and the firms experimenting most thoughtfully with these combinations are the ones best placed to define what value creation in TMT looks like over the next decade. All in all, TMT is not just an attractive vertical for investment, it may well be the era-defining sector of focus. 

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