The technology industry continues to innovate and excite moving as it moves at a fast pace. Technology devices and infrastructure are becoming smarter and more connected, supported by emerging technologies such as artificial intelligence (AI) and the Internet of Things (IoT). Digital transformation within businesses and the wider economy is being supported by advancements in IT service provision, notably the adoption of cloud and edge computing technologies.
Strong corporate and private equity balance sheets drove the sector’s robust deal activity in 2021, and buyers used tech M&A to keep up with the rapid pace of digitization across industries and to differentiate themselves with tech capabilities. While IT enjoyed high valuations in recent years, higher interest rates may dampen multiples, which are often discounted far into the future. In recent months, high-growth tech shares have started to underperform, with markets pricing in multiple interest rate hikes from the Fed in 2022.
After consolidation plays and gigantic M&A deals triggered calls for increased scrutiny on potential monopolies, government agencies across the globe have been more aggressive in their antitrust enforcement in various industries, including tech.
* According to Pitchbook’s 2021 Global M&A Report
FCL Industry Coverage
- Advanced Manufacturing
- Artificial Intelligence
- Internet of Things
The sector thrived during 2021, but 2022 exhibited a sharp decline in number of deals. Q1 of 2023 showed a 56% decrease in the total number of deals closed compared to Q1 of 2022. In the median post valuation, we can see a recently positive trend with Q1 2023 being 5% higher than Q1 of 2022.