M&A Market Dynamics – Software & Technology
- The fourth quarter of 2021 came to a strong finish in a record year, with global M&A volume of 1,126 deal announcements representing the second highest quarter of the year and combining for $262B in deal value.
- The appreciable amount of deal volume, combined with the tapered total deal value, indicates that more smaller transactions occurred. One explanation is private equity firms looking to do more tuck-in deals with lower multiples as opposed to adding new platforms at higher valuations.
- Deal volume grew nearly 7% compared to 2020 and almost 15% compared to pre-pandemic 2019, with 4,273 total deal announcements. Deal value soared based on consistently strong valuations, with total deal value nearly doubling 2020’s mark to reach $1.2T, the first trillion-dollar year in history.
Sector Spotlight – Climate Tech
The focus on building an environmentally sustainable future has never been higher for companies, governments, and investors. This is resulting in climate tech being an increasingly attractive market, especially as the segment penetrates and reinvents a wide range of industries. The technology behind decarbonizing existing systems is not only appealing from an environmental standpoint, but it is increasingly attractive from an economic viewpoint.
One component of the climate tech industry is mobility solutions, which accounts for 9% of climate tech venture capital deal value through the first three quarters of 2021(1). Key categories include shared mobility, autonomous cars, smart infrastructure, and micromobility. Success in these fields will be driven by how well companies can leverage machine learning and quantum computing to solve problems such as route planning, which often proves too complex for conventional computers. This industry is still in the early stages but is poised to draw increased institutional and corporate funding.
- PitchBook, Introduction to Climate Tech: A Taxonomy Overview