Article at a glance:

High-tech mergers take shape

The high-technology sector displays all the characteristics of a mature industry overdue for restructuring: slowing growth, slim profit margins, fragmentation. Soon, price pressures and the changing behavior of customers will probably get consolidation going. Smaller companies will have to choose between being acquired or working within the sphere of larger vendors.

The take-away

High-tech companies should anticipate the sector’s imminent restructuring by preparing for more deals—some hostile—and perhaps by repositioning themselves, through changing scale and scope, within an evolving industry structure.

This article is part of a McKinsey Quarterly package on restructuring in high-tech industries. To read a brief companion piece to this main article, please select from the following. The outlook for enterprise software In software's coming shakeout, big companies will get bigger, while smaller ones will need to play smart or close shop. Not by M&A alone Sometimes alliances make more sense than mergers or acquisitions.