Trends to Watch as M&A Activity Picks Up
News, insights and updates from the team at Bloom Equity Partners
Happy Friday fellow technology investors and operators.
We’re back with The Weekly Bloom - a must-read for investors, operators, and founders navigating the world of software private equity. This week we’re looking at:
3 M&A trends impacting the private equity market
Software PE deals from the past week
Insights from thought leaders across the industry
Five takeaways SaaS investors and entrepreneurs often overlook
3 Signs of a Healthy M&A Environment in 2023
The 2022 M&A market saw a stark contrast between the two halves of the year. In the first half, deal activity was strong, including several mega-deals valued at over $10 billion. However, in the second half, deal activity slowed meaningfully due to macroeconomic uncertainty, volatile capital markets, rising interest rates, and inflation.
However, looking ahead, a recent Morgan Stanley report indicates that M&A activity is expected to return quickly as some of the headwinds abate. Well-capitalized companies making acquisitions in their core businesses, financial sponsors deploying record amounts of capital, and uneven performance among companies stoking shareholder activism are expected to drive M&A activity.
Well-capitalized companies are making acquisitions in their core business areas
It’s anticipated that large corporates are going to make additive acquisitions in their core businesses, despite an economic downturn. Many balance sheets remain strong in comparison to past recessionary environments, which could be an opportunity for inorganic growth playbooks to be deployed.
In a market environment with valuations remaining in flux, that activity could also take the form of unsolicited or “hostile” acquisition proposals.
Financial sponsors are looking to deploy their record amounts of dry powder
Private equity firms with a record amount of uninvested capital are primed to deploy capital. According to Preqin, global private equity and venture capital dry powder stood at a record $1.96 trillion as of EOY 2022. Not to mention, take-privates can be expected to continue in 2023 as financial buyers are looking to take advantage of the softening public valuations.
Shareholder activism has increased in 2023
Companies' varying reactions to inflation last year caused a significant amount of performance variance between stocks in the same sectors. According to the report, The number of activism campaigns at U.S. companies in 2022 exceeded 2021 levels by approximately 14%. For underperforming companies, activists have already launched campaigns to push for changes they believe will create value, and that is expected to continue in 2023.
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You can give the full report a read: here
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What We’re Reading and Listening To…
Vertical SaaS Decoded: Five Takeaways Investors and Entrepreneurs Often Overlook
Deals From Across The Industry
Vista Equity's Finastra explores $7 bln banking unit sale
Snow Software owners explore $1 billion sale
Francisco Partners Nears $1.7 Billion Deal for Software Provider Sumo Logic
We’re Looking For An Operating Partner
We're looking for folks with decorated experiences as a CEO/COO/CRO/CFO, specifically with LMM B2B Technology companies ($5-50m in revenues) to join Bloom Equity Partners' internal consulting group. We are open to flexible arrangements (full-time, part-time, or contract).
This effort is to support our goal of providing stage-appropriate strategic and tactical advice to the management teams that we are fortunate to partner with, on our quest to develop already great companies into market leaders.
Please reach out if there's a fit or if you would like to learn more.
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Here’s the link to the job posting: Operating Partner
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