Allied Advisers is pleased to share brief insights on the current M&A markets. We had 5 clients exit in the last 8 months including 2 in the last month and have other mandates under LOI. Here is our brief take.
We Continue to See an Improving Technology M&A Market in 2024 and Beyond.
The Technology sector along with major stock market indices have shown a strong upward trend in the last quarter, with public market valuations rebounding to levels seen in 2019 (if you remove the bubble in 2021, we are at historic norms). M&A deal volumes are low compared to peak years but is improving and expected to reach and exceed 2020 levels by EOY. Valuation multiples have ticked upwards, signaling improved market sentiment and investor confidence. We are seeing a higher level of activity from both strategic and financial buyers, with PEs increasing their relative share of deals driven by a high level of dry powder and lower interest rates, which we expect to further decline.
Buyers are targeting mid-cap companies with proprietary technology or niche market dominance. AI, Cybersecurity and Vertical SaaS in particular are fueling M&A activity, with rising AI adoption in enterprise significantly boosting deal volume. Sellers who held back in 2023 are now actively entering the market, signaling a positive sentiment. Sellers are advised to run a process as there is variance in the value offered by buyers and a market driven price discovery is a good way to achieve optimal value.
M&A sweet spot: Lightly Funded Companies With Sustainable Revenue and Cash flow Growth with 12 months of runway.
Companies that will have strong M&A outcomes are likely to be those that have a strong blend of growth and profitability (e.g. exceed Rule of 40) or a path to profitability and are addressing a large and important market, have technology differentiation and team with strong and identifiable value propositions.
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