In Finalis’ recent analysis of dealmaking trends we anticipate in 2024, we highlighted tech dealmaking as one of the primary trends in M&A. Understanding and adeptly navigating this trend is vital for investment bankers seeking to fully engage in what should be a vibrant tech transaction market. This report offers a penetrating analysis of this pivotal trend, evaluating the current state of tech dealmaking, and underscoring why 2024 is poised to be a year of exceptional opportunities in technology-related deals.
Considerations in tech deals
Understanding how tech dealmaking trends will unfold this year necessitates a comprehensive understanding of market conditions, facts, and expectations.
In the face of challenges posed by global macroeconomic conditions across capital markets, financial institutions are recalibrating their Return on Investment (ROI) focus in shaping their technology strategies. The strategic imperative of placing well-informed bets to innovate and transform has never been more crucial, and this is why the market will be particularly focused on tech in 2024.
Consequential facts for 2024
a) Macroeconomic conditions create a new space for tech dealmakers
The prevailing uncertainty in the global macroeconomic environment has created an unfavorable atmosphere, making capital raises more difficult. Factors contributing to this challenge range from escalating interest rates to geopolitical instability.
Investors, averse to uncertainty, assess this unfavorable macroeconomic climate and correctly see the steep challenges associated with securing capital. Consequently, many privately-held technology companies have been compelled to adopt innovative financing alternatives, or to outright restructure their business models in order to prioritize cash preservation.
Noteworthy among these adaptations is the trend of technology-focused initial public offerings (IPOs), reflecting a strategic response to the prevailing economic circumstances. This shift towards IPOs underscores the industry's resilience and its commitment to navigating the intricate financial landscape.
b) The resurgence of tech IPOs
There is a forecasted upswing in tech IPOs for 2024, a development that has garnered significant interest among industry experts and is directly related to the aforementioned macroeconomic context.
A detailed analysis reveals a modest count of just five IPOs in 2023, with a mere two recorded the preceding year. This statistical backdrop prompts a compelling inquiry into the underlying factors that contribute to the anticipation of a substantial increase, with an expected 40 IPOs projected for the current year.
c) The AI revolution influences M&A activities:
After facing challenges since 2022, M&A activity is poised for a rebound in 2024, with Artificial Intelligence (AI) playing a pivotal role. According to McKinsey, the emergence of generative AI tools like ChatGPT in 2022 marked a pivotal moment in the tech industry.
With interest rates coming down and inflation getting more under control, companies are increasingly apprehensive about falling behind in AI capabilities, and this concern is driving a significant shift in the landscape of M&A activities. This shift will entail a rise in transactions related to the acquisition of AI technologies or specialized firms in this field, as organizations strive to secure and enhance their capabilities in this crucial technological domain.
The rapid evolution of AI applications is forcing CEOs and boards to decide whether to build AI-driven assets, or simply buy them outright. This decision-making process should fuel an increase in M&A volume, as companies seek to enhance efficiency and accelerate innovation through AI integration. Already in 2023, a major AI-related M&A transaction was witnessed, with Cisco Systems acquiring cybersecurity giant Splunk for $28B and IBM securing Apptio for $4.6B.
While this discussion thus far has highlighted factors capturing dealmakers' attention in generating business within the tech environment, it is equally crucial to acknowledge the pivotal role that technology and AI play as indispensable tools in streamlining processes for investment bankers. Last year, we delved into the rising trend of technology's influence, and remarkable developments in AI over the past few months has only further validated our foresight.
The integration of technology and AI stands as a testament to its capacity to enhance efficiency and redefine operational frameworks within the investment banking domain. As we continue to witness the evolution of these trends, it becomes imperative for investment bankers to focus a laserlike attention on these technological advancements.
Connect, your ally for tech dealmaking
As tech trends promise excitement and a healthy bottom line in 2024, an obvious question arises: How can I access these opportunities? Look no further than the Finalis Connect platform. With 342 active tech deals and an impressive $9.1B in deal volume, Finalis Connect stands as a formidable key player in the technology landscape. Its portfolio highlights a diverse range of sub-verticals, including 34 AI and 118 SaaS deals, showcasing its adaptability to evolving tech trends.
Among all transactions available on the platform, Connect primarily focuses on capital raises (66%), alongside M&A deals (25%), and consulting engagements (9%). Notably, 85% of Finalis’ Connect tech and fintech deals are U.S.-based, reflecting a robust domestic market presence. Collaboration within the sectors remained strong in 2023, with over 30 FSAs signed between Finalis bankers, fostering collaborative efforts in tech transactions.
Does any of this appeal to you? If so, explore our Connect platform to find solutions.
How can Finalis help?
Investment bankers must adapt to the evolving landscape and capitalize on investment banking technology advancements to position themselves for success in 2024. By staying ahead of the curve and keeping a close eye on key trends, dealmakers can unlock new opportunities for growth and success.
With Finalis’ platform, Connect, investment bankers can access substantial bandwidth to partner for project-specific teams, boosting new business opportunities in the industry segment of your preference, especially in the tech sector, prevalent on our platform.
Join Finalis to discover 500+ seasoned bankers and potential partners spanning various market segments and deal types. Access to diverse skills and tools, including financial modeling and marketing materials, along with valuable market insights, is just a click away.
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