Mergers and acquisitions activity in the technology sector has demonstrated remarkable resilience, even in the face of market fluctuations in the last few years. The tech landscape remains a magnet for substantial investment, highlighted by robust EBITDA multiples across key subsectors. This trend points to a strong and sustained confidence from investors, positioning the industry for exciting opportunities ahead.

Current Landscape of M&A Multiples by Subsector

As of early 2024, M&A multiples across various technology subsectors underscore this optimism:

• Adtech: EBITDA Multiple: 10.7x
• Cybersecurity: EBITDA Multiple: 12.6x
• B2B SaaS: EBITDA Multiple: 12.5x
• Software Development: EBITDA Multiple: 11.9x

These EBITDA multiples reflect a robust appetite for technology assets, showcasing investor confidence in areas critical to digital transformation strategies.

Revenue Multiples Analysis

Revenue Multiples 2022-H1 2024:

EBITDA Multiples H1 2024:

Subsector Breakdowns

1. Cybersecurity:
   • With the rise in cyber threats, the cybersecurity sector has become increasingly essential. The EBITDA multiple of 12.6x and revenue multiple of 8.0x indicate strong investor confidence in the sector’s sustainability and growth potential. As businesses continue to prioritize digital security, cybersecurity firms are well-positioned to attract sustained investment interest.
2. B2B SaaS:
   • The B2B SaaS space remains a powerhouse with an EBITDA multiple of 12.5x and a revenue multiple of 7.9x. Companies in this sector benefit from predictable, subscription-based revenues, making them appealing to investors. The demand for streamlined, efficient business solutions will likely drive further M&A activity as companies seek to enhance their offerings through strategic acquisitions.
3. Software Development:
   • With an EBITDA multiple of 11.9x and revenue multiple of 7.2x, the software development sector continues to showcase its relevance in supporting digital transformation initiatives. As organizations increasingly rely on custom software solutions to optimize operations, this subsector is expected to see ongoing investment and consolidation.
4. Adtech:
   • Although trailing slightly behind the others with an EBITDA multiple of 10.7x and revenue multiple of 6.5x, the AdTech sector still presents promising opportunities for growth. The shift towards data-driven marketing strategies and increased digital advertising spend will likely drive interest in M&A as companies look to innovate and capture market share.

The Road Ahead for Tech M&A

Looking into 2025, several factors are expected to contribute to a rise in M&A activity within the tech sector:

• Economic Conditions: Anticipated easing of interest rates and adjustments in regulatory guidelines under a potential second Trump administration could stimulate M&A activity as companies capitalize on favorable conditions to pursue strategic acquisitions.
• Continued Innovation: The tech industry is characterized by rapid innovation and evolution. Companies will likely seek out acquisitions to bolster their capabilities, adapt to emerging technologies, and meet the shifting preferences of consumers and businesses.
• Increased Competition: As traditional industries are disrupted, tech companies across various sectors will look for ways to differentiate themselves. M&A will be a key strategy for enhancing competitive advantages, gaining market share, and accessing new technologies or customer bases.

Leverage ACT Capital Advisors’ proven expertise in the technology sector to maximize your business value with our tailored strategic insights. With a strong track record in the technology arena, efficient turnaround times with an average deal length of 8 months, and substantial valuation premiums averaging 63%, we are your ultimate partner for navigating the complexities of tech transactions.

If you want to learn more, please contact John Norton, the Managing Director who leads our Technology Team. John specializes in IT Services, SaaS, and Software Development and is ready to assist you in exploring exciting opportunities.

About ACT Capital Advisors 
ACT Capital Advisors is a premier mergers & acquisitions firm representing lower to middle-market companies across all industries. ACT has a 40-year history of deal-making, closing 250+ transactions, and unlocking over $2.5 billion in wealth for its clients. For more information, visit https://actcapitaladvisors.com. 

Sources:

• First Page Sage
• Statista