M&A Market Dynamics – Software & Technology
- The first quarter of 2022 saw a record number of transactions even as total deal value decreased, with 1,412 transactions in the quarter only combining for $217B in value.
- The sharp uptick in total deal volume, coupled with the lowest total deal value since the third quarter of 2020, indicates that many opportunistic buyers are pursuing smaller transactions, which typically feature lower multiples due to a size discount.
- Q1 2022 contrasted sharply with Q1 2021, with total deal value down 39% but volume up 47%. This trend is observed over the March 2022 LTM period and may become more pronounced as 2022 unfolds, with a flurry of smaller deals driving M&A volumes up as buyers chase favorable valuations.
Sector Spotlight – Industrial IoT
Industrial IoT technologies, also known as Industry 4.0, are creating a digital transformation for industries such as manufacturing, transportation, oil & gas, and logistics. A critical application of this technology is the monitoring and diagnosing of industrial machinery, which allows for increased productivity and predictive maintenance. Most industrial machines are not connected to the internet, but adoption of smart manufacturing is positioned to grow significantly due to the advanced analytics capabilities and improved machine throughput derived from these technologies(1).
One of the focus areas for emerging Industrial IoT technologies will be improved visibility along the global supply chain. Companies are facing increased pressure to provide transparency across all stages of the value chain, and both manufacturers and distributors are adopting new technologies to accurately track inventory to avoid retail shrinkage caused by theft or system errors.
- PitchBook, 2021 Annual Internet of Things (IoT) Report