Hitting their Covid lows, tech M&A deal volume dropped to its lowest level since 2020, according to a report from CBInsights.
The CBInsights report also reveals that risk-off strategic acquirers are the primary drivers of “a slowdown in tech M&A activity.”
The report further notes that financial sponsors “with heaps of dry powder remain active, but not exuberantly so.” CBInsights also mentioned that “a dearth of high-quality assets, more expensive debt, and macro uncertainty have them also proceeding cautiously.”
$700,000 per employee
The report added that “the median valuation per employee rises ~$120K QoQ in Q2.”
Notably, buyers paid “more per employee in Q2’23 than in the previous quarter.” However, valuation per employee levels “remain depressed from 2021 highs, reflecting today’s more conservative and sober buying environment.”
USA loses (sorta)
The CBInsights report pointed out that Europe “leads in tech M&A volume, but the US gets the largest deals.”
For the sixth quarter in a row, European M&A activity “outpaced the US on a pure deal volume basis.” That said, the US remains “the undisputed champion of larger M&A, comprising 41% of $100M+ M&A deals in Q2.” However, that 41% is “below the US’ historical share (typically 45-60%) of deals with the largest valuations.”
Big tech scared of M&A
In Q2, big tech M&A activity “hits an 18-quarter low.” Apple (NASDAQ:AAPL) was the only big tech firm “to acquire a company in Q2’23.”
Beyond the prevailing risk-off mentality of strategic acquirers, the normally acquisitive big tech players are “hobbled by a more challenging regulatory (antitrust) climate — especially in the US and Europe.”
1% of M&A deals are > $1B
Billion-dollar M&A deals make up “a fraction of total M&A activity.”
Though still below 2021 highs, “the number of M&A targets valued at $1B+ rose to 21 in Q2, up from 14 the prior quarter.”
Overall, after 2 quarters in decline, “the median valuation for M&A targets rebounded in Q2, nearly doubling to $45M.”