Tech M&A Value Nosedives 55% in 2023: Report
The number of technology sector mergers and acquisitions has gone up, but the total market value has declined.
At a Glance
- Tech M&A overall value down in 2023, but total deals are up slightly.
- Regulatory environment could impact future deals.
- Mega deals could set off M&A activity in the near term.
Despite a couple of recent high profile multi-billion-dollar tech deals, the overall market for mergers and acquisitions has fallen to its lowest point in a decade. The number of deals has gone up, but the total market value has declined.
While Cisco’s recently unveiled $28 billion plan to acquire software firm Splunk spurred excitement about potential blockbuster tech mergers and acquisitions (M&A), a new report from LSEG shows the tech deal landscape suffered a big value drop in 2023.
Technology M&A, according to the report, accounted for 14.5% of the global market in the first nine months of 2023 with a total value of $286.4 billion -- a 55% decline compared with the same period last year. It was the worst year-to-date haul for the tech sector in six years. But deal volume is up year-over-year by 1 percent -- a two-year high for the number of deals made.
Matthew Toole, director of deals intelligence for LSEG, says the M&A market is adjusting to the “new normal” in the post-pandemic landscape. “The world of deal-making is getting used to what will be the new normal, which firstly is rising interest rates -- it used to be much cheaper to do deals and that brought in record levels of activity in 2020 and 2021,” he says.
Bright spots for tech were the Cisco/Spunk deal, the private investment firm purchase of SAP-backed software company Qualtrics for $12.5 billion that closed in June, and the $16 billion buyout of Japan’s Toshiba Corp. While it’s no secret that the technology sector suffered a downturn after a short-lived boom caused by at-home tech needs from the COVID 19 pandemic lockdowns, analysts are hopeful recent deals might be a sign of a turnaround.
IT consulting and electronics accounted for 80% of the overall deal activity in the tech sector.
Regulations May Factor into M&A Rebound
Toole says the tech sector will also have to deal with a changing regulatory environment, which could impact how M&A rebounds.