TechStrat Quarterly Tech M&A Market Report
While our tech-focused M&A advisory has focused on deal execution, we’ve collected a few observations on the recent M&A market that we wanted to share with our community of founders, executives, investors, and acquirers.
The Largest Wealth Transfer in History: The Clock is Ticking
The next decade will see an unprecedented wave of business owners needing to sell—but M&A markets are sluggish. What should company owners and investors do?
The Wealth Equation
US investors held $56 trillion in public stocks in Q4 2024 (Reuters). A single phone call can turn that into cash. Meanwhile, private companies generated 10% more revenue and earnings than public ones (Cole Campbell, Jacob Robbins). Yet, the wealth locked in these private businesses isn’t as easily liquidated.
Per the US Census Bureau (2022), 52.3% of business owners are over 55—22.8% are 65+. They’ve built valuable businesses, but many are too specialized, too complex to simply pass down. As one of our clients put it, “I wouldn’t wish my business on my children.”
The Market Reality
At TechStrat, we step back every quarter to reassess the M&A landscape. Here’s what we’ve seen in terms of:
- Market Trends
- Our Q1 Deal Activity
- Appetite for AI
- Best Practices
We’ve closed over $1B in tech transactions with giants like Google, Microsoft, and top PE funds like Vista and Accel-KKR. We specialize in emerging tech firms poised for M&A-driven growth.
1. Q1 M&A Market Trends: A Brutal Slowdown
M&A hit a 20-year low (Dealogic). Close rates fell below 50% (Intralinks). This slowdown occurred before the tariff drama started. Startups are facing unprecedented headwinds. The business-friendly narrative—lower interest rates, deregulation, reduced inflation—has yet to materialize. Tariffs are roiling the markets and raising inflation fears, while antitrust scrutiny remains aggressive. However, M&A planning and execution are long-term strategies that require a steady hand and continuous progress. So far we have not seen buyers or investors abandon deals because of short term market volatility.
Public SaaS valuations grew 3.2% in 2024, with 21% of companies hitting 10x ARR valuations. But here’s the catch: 80% of those had 15%+ revenue growth and 10%+ EBITDA margins. Retention and churn rates are now make-or-break factors. The gold rush is over. SaaS is being valued on fundamentals, not hype.
2. TechStrat Q1 Deal Activity: Tactical, Not Showy
Deals are closing—but quietly. Tactical acquisitions are dominating, with little fanfare.
Our recent closings include:
- The majority recapitalization of a B2B indoor mapping and public safety firm
- The sale of a tech-enabled virtual assistant services firm shifting toward AI
- The sale of a document management and B2B messaging company
- The sale of an AI-focused outsourced software development services firm to Solvd, a portfolio company of Siguler Guff
- The sale of a B2B competitive intelligence company accelerating its AI transformation (not disclosed)
- The acquisition of a fleet management software business from a publicly traded company, on behalf of a founder-owned client
Deals under LOI include:
- The pending sale of a tech-enabled provider of expert medical opinions
- The pending sale of a near-shore outsourced software development services firm
Successful deals in Q1 sat on a barbell curve—either blockbuster headline-grabbers (hello, Wiz) or small, targeted acquisitions. Most deals were obviously in the second bucket.
3. Appetite for AI: The Overhyped Essential
AI isn’t a magic bullet, but it’s in every deal. To stay competitive, companies need to deliver more value without price hikes. Efficiency is the name of the game—AI is the tool.
TechStrat’s Nat Burgess tackled this in-depth on the “AI & Data-Driven Leadership” podcast.
4. Best Practices: No Dumb Money, No Quick Exits
There’s no easy cash-out anymore, but there’s never been a better time to become the category leader. The key? Preparation. Companies that invest in readiness achieve higher close rates (Intralinks).
What Buyers Want Now:
- Recurring Revenue: Mission-critical tech, long-term contracts, high retention.
- Scalability: Large TAM, strong differentiation, competitive moat, and cost-efficient growth.
- Clean Diligence: Solid cap table, clear IP ownership, no legal red flags.
- Pragmatic Leadership: Growth-oriented, disciplined, and adaptable.
- Profitability: At least a year of profitability, or a clear, conservative path to it.
Times Have Changed:
- Overstaffing doesn’t inflate valuation anymore.
- Killing stalled products is a strength, not a weakness.
- Labor lawsuits are distractions—settle and move on.
- One-time revenue isn’t a selling point.
- “Growth at all costs” is naive.
M&A is brutally selective now. Use this lull to strengthen your fundamentals. When the market rebounds, the companies that put in the work today will be the first to capitalize.
The largest wealth transfer in history is happening. Please don’t hesitate to reach out to us if you are leading, investing, or advising a software company or tech-enabled services firm that is considering an exit or recapitalization, now or in the future.