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Tech M&A Outlook: What Types of Deals are Getting Done?

Despite the past year's economic downturn, M&A transactions in the tech sector are still getting done. It might be at a different level than 2021, but deals are happening, particularly in certain sections of the tech industry.

Woodside Capital Partners recently analyzed what types of deals in the tech sector are moving forward, looking at transactions from August through the end of October.

They found that the active tech M&A verticals during this period were:

  • Industrial Tech & IoT (41 deals closed, $14B transaction value)

  • Artificial intelligence (39 deals, $14B transaction value)

  • Cybersecurity (13 deals closed, $16B transaction value)

  • Clean Tech (16 deals closed, $6B transaction value)

  • Ecommerce (16 deals closed; $1B transaction value)

  • HR Tech (8 deals closed; $500M transaction value)

  • Ad Tech (10 deals; $1B transaction value)

Their analysis also showed that the most active category of sellers had been VC-backed companies, with 146 transactions during the August-October window and $18B of aggregate transaction value. As we have previously discussed, this could be an area where we see an increase in the new year as valuations remain low. Startups are pivoting as they continue to face challenges due to the global economy.

Some other highlights from their analysis were the 56 transactions involving private equity-backed companies, with an aggregate deal value of $22B. They also point out that buyers are getting very strategic when looking at targets, looking for those companies who can fill in gaps for them, have healthy balance sheets, and shop for "bargains."

They also found that many large companies are taking a "defensive" approach to M&A to divest non-core assets. During the Aug-Oct timeframe, eight divestitures were closed with an aggregate value of $2B.

One of the most important takeaways from this analysis is that buyers are getting increasingly strategic. They are looking for emerging growth companies that are operating highly efficiently during this time and have incredible potential when we come out of this downturn. That day is coming, and smart founders will be preparing and planning now to be well positioned to take advantage of the M&A boom many are predicting to come in 2023.

© 2023 Foley & Lardner LLPNational Law Review, Volume XII, Number 341

About this Author

 Louis Lehot Private Equity Attorney Foley and Lardner Law Firm

Louis Lehot is a partner and business lawyer with Foley & Lardner LLP, based in the firm’s Silicon Valley, San Francisco and Los Angeles offices, where he is a member of the Private Equity & Venture Capital, M&A and Transactions Practices as well as the Technology, Health Care, Life Sciences and Energy Industry Teams. Louis focuses his practice on advising entrepreneurs and their management teams, investors and financial advisors at all stages of growth, from garage to global. Louis especially enjoys being able to help his clients achieve hyper-growth, go public and to...

 Brandee L. Diamond Attorney Foley  & Lardner LLP

Brandee Diamond is a partner with Foley & Lardner LLP, based in the firm’s San Francisco office and also working in the Silicon Valley office where she is a member of the Transactions Practice.

Eric Chow Senior Counsel Foley & Lardner LLP
Senior Counsel

Eric Chow is a senior counsel and business lawyer with Foley & Lardner LLP, based in the firm’s Silicon Valley office, where he is a member of the Transactions Practice.

Prior to joining Foley, Eric gained experience working with public and private mergers and acquisitions, investments, joint ventures, as well as other corporate transactions, with a focus on the Northern California market, across a wide variety of industries including technology, pharmaceuticals, medical devices and real estate. Eric’s work also includes cross-border mergers...