Key Trends in 2024 Tech M&A
Shift Towards Scale in Tech M&A
Tech M&A in 2024 saw a significant shift toward scale, with fewer transactions but higher aggregate deal value, resulting in larger average deal sizes.
Tech M&A’s shift to Profitable Growth
Higher interest rates and evolving valuations have reshaped the M&A playbook for tech companies. Investors and lenders now scrutinize margins and profitability, not just revenue growth. The Rule of 40 – which states that a company’s revenue growth rate plus its profit margin should exceed 40% – has become a critical benchmark for assessing tech deals, particularly in the SaaS and enterprise software sectors.
As a result, even growth-focused tech deals are expected to deliver meaningful cost synergies alongside revenue synergies. This marks a notable shift—tech acquirers must now prioritize efficiency and cost savings in tandem with growth objectives, rather than assuming that growth alone will justify a deal. Companies that fail to meet the Rule of 40 face heightened investor skepticism, making operational discipline more important than ever in the evolving M&A landscape.
Private Equity’s Comeback
As we predicted in the last edition of our newsletter, PE firms have stepped aggressively into the tech M&A market. After a sluggish 2023, PE buyers made a strong comeback in 2024. Global PE deal value in tech jumped approximately 34%, with financial sponsors accounting for nearly one-third of total tech buyout value.
PE firms took advantage of improved financing conditions and more reasonable tech valuations – particularly in Europe and parts of Asia – to pursue acquisitions. Many high-profile tech deals, especially take-privates of public tech companies, were led by PE consortia. With an estimated $2+ trillion in dry powder (uninvested capital) available globally, financial sponsors became a key driver of M&A and are expected to remain highly active moving forward.
Decline in Talent Deals
Another trend we’ve noticed is the decline of so-called “talent deals” – where small teams were acquired for tens of millions solely due to their in-house skills. The scarcity of talent in European tech markets is no longer as severe as it once was, and rapid advancements in AI are prompting companies to reconsider the extent to which human talent will be needed in the future.
Looking Ahead: Tech M&A Challenges and Opportunities in 2025
The Business Impact of Trump’s 2025 Presidency
As of now, one of the most significant influences on the global business landscape is President Trump and his current policies. To provide clarity on potential outcomes, we have outlined the key economic implications of his administration:
Global Impact on Tech M&A
Uncertainty & Trade Tensions
The M&A market was expected to rebound in 2025, driven by falling interest rates and pro-business policies under Trump’s second term. However, early volatility is dampening those hopes. Trump’s tariffs on major trading partners, including China, Mexico and Canada have created uncertainty, rattling markets. The issue is less about tariffs and more about the uncertainty they create. Markets and businesses thrive on stability, but the lack of clear rules makes long-term planning difficult.
Market Volatility
U.S. stock markets have faced declines due to unpredictable policies, while European and Asian markets show resilience. This shift is driving investors toward more stable regions, affecting U.S. tech valuations.
European Tech M&A
A Favorable Investment Climate
European markets, supported by increased government spending, are seeing growth in key indices like the Euro Stoxx 50 and DAX, making the region attractive for tech investments and M&A.
Opportunities Amid U.S. Retrenchment
With U.S. tech firms facing domestic headwinds, European companies have a window to expand globally, leveraging strategic acquisitions and partnerships.
In summary, President Trump’s current trade and foreign policies are creating a complex environment for global tech M&A. While the U.S. faces challenges due to increased protectionism and market volatility, Europe appears to be capitalizing on these developments, fostering a more robust and attractive landscape for tech mergers and acquisitions in 2025.
Abundant Capital (Dry Powder)
Private equity funds and venture investors are sitting on record levels of undeployed capital. Many are expected to turn to the tech sector in search of higher returns. Furthermore, the backlog of assets that PE firms need to exit suggests an increase in buyout and flip activity in the near future.
Rising Demand from PE Firms
Given the increasing activity of PE firms in tech M&A, companies looking to position themselves as attractive targets must showcase both growth and profitability – a challenge for many. However, the good news is that the profitability required to appeal to financial buyers is lower than in previous years, and the growth expectations are not as high as those typically required by venture capitalists.
Challenges in Capturing Revenue Synergies
One of the core operational challenges in tech M&A is realizing revenue synergies. Integrating product portfolios and salesforces to enable cross-selling or upselling is often complex. The acquired product may require technical integration, and sales teams need training and incentives to push new offerings. Cultural and organizational differences – such as merging engineering teams or go-to-market strategies – can further hinder revenue synergies. Many past deals have underperformed in this regard due to slow product integration and post-merger talent attrition.
Tech M&A Deal Volume Declines
When analyzing tech M&A activity in 2024 compared to 2023, despite regional and quarterly fluctuations, one clear trend emerges: deal volume has declined.
A year-over-year comparison reveals a noticeable drop in deal count across Europe and Asia, while the U.S. experienced a marginal uptick. This underscores North America’s position as the most active tech M&A market in 2024.
North America Leads Tech M&A
Despite regional and quarterly fluctuations, aggregate deal value tells a different story. A quarterly comparison between 2023 and 2024 reveals significant surges in deal value in certain quarters.
A year-over-year analysis offers a clearer perspective.
In North America, the increase in both deal volume and value can be attributed to strong economic fundamentals, a more favorable cost of capital, and high investor liquidity, all of which contributed to the resurgence of big-tech deals in 2024.
Europe, on the other hand, lagged behind other regions in tech deal activity. However, the earlier mentioned rise in PE activity was particularly pronounced in Europe, with a record 95 take-private acquisitions by PE firms. Many European tech companies were perceived as undervalued, attracting U.S. and global investors seeking strategic bargains. A more flexible regulatory environment further fueled optimism, allowing PE firms to leverage lower valuations to acquire and restructure assets. This led to a cautious but notable uptick in tech M&A despite persistent economic and regulatory headwinds.
While Asian deal value also increased from 2023, Japan emerged as a key M&A hotspot, with deal value soaring due to foreign acquirers and activist investors targeting undervalued tech and industrial companies. In contrast, Greater China experienced a slowdown, with domestic M&A activity supported by government initiatives but foreign investment declining sharply due to economic and regulatory uncertainties. Across Asia, companies focused on scaling and acquiring strategic tech assets, particularly in semiconductors, telecommunications, and software.
Impact on Average Tech M&A Deal Size
As previously noted, the decline in deal volume coupled with an increase in deal value has resulted in larger average deal sizes in both the U.S. and Asia. In contrast, Europe has experienced a modest contraction in deal terms, reflecting slight declines in both deal volume and deal value.
Tech M&A Staying Ahead
While not surprising, this graph again shows that tech M&A accounts for the majority of global private M&A deals. Rapid technology disruption is compelling companies to do deals to stay competitive. Both tech companies and non-tech incumbents are highly motivated to acquire new tech capabilities or products through M&A. This drive to “buy” innovation and growth (e.g. AI, software, cloud services) underpins much of the deal activity. In many large tech deals (>$100M), the buyers are often non-tech firms seeking to retool their businesses with tech assets.
Boom, Bust and Stabilization
Private Tech M&A valuations have come down from peak levels, but are slowly rebounding again. Private tech M&A valuations have followed a dramatic trajectory in recent years.
During the 2020–2021 tech boom, abundant capital and bullish investor sentiment drove deal multiples to record heights. Low interest rates and strong demand for digital transformation fueled aggressive pricing – investors were effectively willing to “overpay” for growth in 2021 . However, 2022–2023 brought a sharp correction. As investors grew skeptical of sky-high tech valuations and central banks raised interest rates, deal activity slowed and pricing pulled back . By now, valuations have stabilized closer to historical norms.
Selected Tech M&A Transaction Highlights
