The Technology M&A Market Is Active, Open, And Offers Attractive Exit Valuations, Despite What You May Have Heard Recently

Normally, we start our blogs with background, followed by data and analysis, and end with what we hope are some interesting and useful conclusions. In this blog, however, we would like to start with our conclusion: Despite all the apparent “bad news” in the economy and stock market, companies with profitable business models that are seeking to sell their businesses today are able to get attractive exits at historically attractive valuation levels. Because this message runs counter to so much of what we read in the popular press, we encourage you to not believe everything that you hear about the state of the technology M&A market.

Negative news indeed has seemed prevalent lately. Layoffs at many leading technology companies. Stubborn core inflation. The Federal Reserve focused on fighting inflation through increasing interest rates. Fear of the economy tipping into a recession. Relatively low amounts of venture capital being raised. IPO volume being at historically low levels. Wow, things seem to be really difficult in the economy and in the markets.

Indeed, parts of the market have been negatively affected. Early-stage venture capital investment has declined significantly; large capitalization private equity transactions are more challenging given high interest rates and lower leverage ratios; and unicorn valuations (private companies valued at over $1 billion) based on hyper growth assumptions have become fewer and farther between.

Given this steady drumbeat of challenging news, the environment for companies considering selling their business or raising capital would seem difficult indeed. But is this statement actually true? Have the popular press provided an accurate view of where the M&A market stands today? Or, might there actually be bright spots in the M&A market, particularly for technology companies in the middle market?

Navidar wanted to carefully examine the current state of the M&A market—with particular focus on the middle-market—and put current market conditions into historical perspective. What we are seeing first-hand in the M&A middle market suggested that it would be wise to take a closer look at what is really happening and let you draw your own conclusions.

We hope that our commentary below will give you a fair appreciation of current market conditions once they are situated in their appropriate historical context and encourage your company to pursue M&A opportunities today—as a seller or as an acquirer—if that is something that you are considering as part of your strategic roadmap.

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