US-based Corum Group expects strong demand for bolt-on technology companies and products to continue driving elevated tech deal volumes in 2024 after the total number of global tech M&A transactions rose 7% last year.
“We saw a big uptick in valuations across all major market segments in Q4 due to the record number of buyers putting capital to use before inflation erodes it,” Bruce Milne, CEO of the California advisory firm, said on its annual tech M&A outlook call.
Corum’s data suggests private equity platform deals were up 17% in 2023 versus 2022; venture capital-backed exits were about even year-on-year; and non-tech buyers were involved in 20% more deals in 2023 than 2022.
Mega-deals were down 44% in 2023, with Cisco’s $28 billion Splunk acquisition less than half the size of the biggest 2022 deal: Microsoft’s $68 billion purchase of Activision Blizzard. But overall, tech M&A transactions totalled 5307 in 2023 compared with 4965 the previous year.
Milne said with “debt financing expensive, venture debt dead to Silicon Valley Bank, IPOs down and a chill in venture capital”, bolt-on acquisitions were dominating transactions, “with new funds emerging every day”.
“We’re seeing an uptick in recapitalisations where some investors are taken out and new investors put in, with a remix of debt and equity,” he said.
“Elevated deal volumes will continue in 2024 for companies involved in disruptive tech trends.”
Corum corporate strategies executive vice president, Tim Goddard, said the “sheer amount of disruption happening” in the global tech space was spurring rather than constraining M&A.
Generative AI enablement was Corum’s number one disruptive market trend. Goddard said the November 2022 launch of ChatGPT sparked a “frenzy of activity by investors, entrepreneurs and, most importantly, customers”, with customer demand translating quickly into buyer demand.
He said high computing needs created another area of demand. A “new ecosystem” of AI infrastructure companies was emerging to address “orchestration, compliance, QA and more”.
Companies were using generative AI in innovative ways to analyse data and produce “novel content”.
Solutions addressing compute scarcity were in demand, from high-performance computing analytics and power management to edge computing.
