The Current Tech M&A Landscape
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The Current Tech M&A Landscape
Global tech M&A deal volume dropped to its lowest point since early in the pandemic, according to the Tech M&A Q3 2023 report by CBI Insights, The market saw a 6% quarter-over-quarter (QoQ) decrease, with only 1,765 tech M&A deals reported. However, aggregate valuation of these deals increased by 10% QoQ to $1.1T.
We reviewed the report to find important insights for you to evaluate the current tech M&A market.
Here are some key takeaways from the report.
Deal Volume Falls
Over the past seven quarters, the global deal market experienced a drop in total deal counts QoQ, with fewer deals reported in six of those quarters. Strategic acquirers showed restraint compared to prior years and remained risk-off in Q3’23. However, some investors with available capital made sizable acquisitions, reflected by QoQ increases in deals worth more than $100 million.
Smaller Companies See More Deals
Around 78% of Q3’23 tech acquisitions featured smaller companies employing fewer than 100 people, with 62% of companies having less than 50 employees. M&A targets worth $100M+ remained a smaller portion (4%) of total M&A activity compared to pre-2022 levels.
Institutionally Backed Targets Lose Value
Despite jumping to 1.5x in Q2’23, valuation step-ups for institutionally backed M&A targets went back down to 0.7x in Q3’23, continuing the trend in Q4’22 and Q1’23 of sub-1x valuation step-ups compared to the valuation from the last equity round.
Financial Deals Remain Steady
Due to macroeconomic uncertainties and a lack of high-quality assets, financial sponsors tread carefully. Financial buyers' share of tech M&A deals remained relatively the same as last quarter. Most financial deals were private company buyouts.
You can view the full report here.
About Bloom Equity Partners
We're big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below. We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.
Our Investment Criteria
Industry: Enterprise Software, Technology and Tech-Enabled Business Services
Geography: North America, Europe, Australia and New Zealand
Revenue: $5M - $50M (>70% recurring)
Growth: 5%+ annual revenue growth
Retention: >80% gross annual customer retention
Profitability: Positive EBITDA or near breakeven within twelve months
Investment Type: Operational control required
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