TechStrat Q2 Tech M&A Market Update

TechStrat has closed four transactions in recent months and has three more under LOI with a few clients coming to market. Contrary to the headlines claiming that today’s market is “discerning” and biased toward mega-deals, we’re seeing a far more nuanced—and active—tech M&A ecosystem.

Here’s what we’re seeing on the front lines:

• Yes, high-growth companies are hot. Fierce competition and multiple bidders are pushing ARR multiples back toward 2022 levels for the select few. But most buyers can’t afford hypergrowth—strategic buyers are still actively pursuing more tactical acquisitions in every performance band – but with conservative pricing.
• Most deals today conclude at pragmatic valuations. Many founders are realizing they’ve hit a ceiling with their current capital structure. They’re selling to unlock the next chapter—and getting it done at fair, if sober, valuations (3–4x ARR for mid-performing companies).
• Structure matters more than ever. Creative deal terms are replacing unrealistic earnouts. We’re negotiating retention-based revaluations, churn-based post-closing clawback notes, and growth bonuses that align incentives—without killing the deal.
• AI is driving deals—but not the way you think. It’s not about building the next LLM. It’s about customer use cases that need AI, paired with acquirers who have the capital and capability to deliver it.
• Headcount scrutiny is intense. M&A activity moves in lockstep with hiring patterns. Layoffs continue across the industry, and buyers are loathe to add headcount except in critical areas. R&D resources, especially AI skills, are still in demand.
• IPO exit paths has narrowed. Strategics are stepping up, outpacing PE buyers in H1 2025. With fewer exit options at the top, PEs have to avoid over-investing in platforms that can’t achieve liquidity when they reach scale.
• Buyers are circling—but slowly. Running a structured process has, in two recent cases, drawn offers from buyers that were monitoring targets from a “wait and see” stance, but were forced into action by a competitive process.

Bottom line: Today’s market isn’t frothy, but it’s functioning. Buyers are serious, selective, and strategic. If you’ve got strong customers and a clear use case for growth—especially through AI—this could be your moment.

We’re actively looking for sellers with strong data, B2B SaaS, AI Services and cybersecurity businesses that may benefit from a strategic partner. Let’s talk if that’s you.