M&A Market Dynamics – Software & Technology
- The third quarter of 2022 saw a continued decrease in deal volume and a sharp decline in deal value, with 1,061 transactions in the quarter combining for $81B in value.
- There is still strong appetite for M&A, though buyers continue to focus on higher-performing, smaller targets. Processes initiated before macro fears heightened are now being completed, and the coming quarters could reflect the increased economic concerns.
- Q3 2022 represents a sizeable decline compared to Q3 2021, specifically from a deal value standpoint, with total deal value down 63% and volume down 14%. The quarter continued the trend of selective buyers pursuing smaller companies, and volumes remain on par with historical averages despite the uncertainty.
Sector Spotlight – Agtech
Agricultural technology, or agtech, encompasses a range of technologies aimed at increasing crop yield, improving farming efficiency, providing financial resources for agricultural operations, and additional applications. The technologies in this sector can include software, biotech inputs, and hardware such as sensors and machinery. Growing subsectors within the space include biotech, indoor farming, agrifinance, animal ag, and precision ag, among others.
There is increased investment within the segment, with investors focusing more on food security, environmentally friendly agricultural practices, and data-driven productivity gains. Big players such as Kellogg and General Mills are now allocating funds toward regenerative agricultural practices. As the regulatory landscape evolves and sustainable farming practices are further scrutinized, new entrants will drive innovation, while large companies may look to M&A as a key growth avenue.