The European M&A market in 2023 has gone through a tumultuous period marked by a number of macroeconomic and geopolitical challenges. The combination of rising interest rates, rising energy costs and geopolitical uncertainties, in particular the current situation in Ukraine, has created a complex environment for both corporate and private equity dealmakers. These factors have led to a marked decline in the activities of M&A transactions and acquisitionsThe first half of 2023 (1H23) saw a significant drop in both the value and volume of transactions, with a year-on-year decline of 52% and 17%, respectively.

The comprehensive report of the Baker Tilly "Global Dealmakers 2023", a comprehensive analysis of trends in the European M&A market. As we can see, the different factors have not affected all sectors equally.

The European landscape of the M&A transactions and acquisitions The technology sector in 2023 presents a dynamic and evolving environment, shaped by a variety of macroeconomic and strategic factors. Here you will find the key trends and outlook for the technology sector from the report:

European M&A market trends for tech sector

1. Difficult market conditions: The European M&A market (M&A transactions-y-acquisitions-m-a/" target="_blank" data-type="page" data-id="54631″ rel="noreferrer noopener">M&A transactions and acquisitions) has faced a difficult year with challenges such as rising interest rates, high energy costs and geopolitical uncertainty. This has led to a significant decline in the activity of M&A transactions and acquisitions in the first half of 2023, with a drop of 52% in transaction value and 17% in volume compared to the previous year.
2. Shift of focus towards mid-market transactions: Despite these challenges, it is worth noting that turbulent times often pave the way for the activities of M&A transactions and acquisitions transformational and strategic. In Europe, dealmakers have demonstrated their agility by moving towards smaller and mid-sized deals that are less risky and easier to finance. This shift aligns well with the persistent long-term trends of digitisation and energy transition, which remain integral to companies' strategic objectives.
3. Persistence of digitisation and energy transition trends: Despite market challenges, long-term trends such as digitisation and the energy transition remain key drivers of the M&A transactions and acquisitions.
4. Improving Conditions: There are indications of improving conditions, with inflation showing signs of cooling, which could lead to more stable interest rates and better conditions for deal structuring.
5. Opportunities in the technology sector: In the technology sector, despite the general market slowdown, there is still a dynamic outlook for the technology business. M&A transactions and acquisitions. The sector remains a cornerstone of dealmakers' long-term strategies, with companies leveraging technology to drive their operations into the digital age. The persistence of digital transformation initiatives has ensured that technology-driven operations remain a key driver of business. M&A transactions and acquisitions in Europe. There are abundant opportunities for proactive dealmakers, especially in areas aligned with digital skills enhancement and digital skills development. acquisitions strategic technologies.
6. Private Equity Funds with Significant Resources: Globally, private equity dealmakers are sitting on a record amount of dry powder, estimated at around US$3.7 trillion, with approximately US$1.1 trillion in buyout funds. This capital availability indicates that there’s significant potential for investment in the market, despite the current challenges. The European tech sector, given its critical role in digital transformation, stands out as a prime target for these investments.
7. Active sectors and markets: The technology, media and telecommunications (TMT) sector is expected to be the most active in M&A transactions and acquisitionswith significant activity also expected in industries such as industrials, consumer products and healthcare. The UK, Ireland, Central and Eastern Europe and the DACH region (Germany, Austria and Switzerland) are key markets with a high number of potential deals.
8. Focus on the M&A transactions and acquisitions of the average market: The European mid-market, characterised by deals valued at between USD 15 million and USD 500 million, promises to be a hive of activity. M&A transactions and acquisitions. This segment offers a wealth of opportunities for both strategic corporate buyers and private equity firms. The middle market is attractive due to its less complex nature and less regulatory and antitrust scrutiny compared to larger deals. In addition, current market conditions have led to a cooling of valuations in the middle market, presenting attractive investment opportunities at more reasonable multiples.
9. Foreign Interest: Despite the challenges, European assets, particularly in the mid-market, continue to attract significant interest from overseas buyers. North American investors, in particular, have been active in the region, drawn by the combination of a large consumer market, skilled workforce, and advanced infrastructure. Similarly, investors from the Asia-Pacific region remain motivated to invest in European assets, seeking technology acquisition and market growth opportunities.
10. TMT sector dynamics: The TMT sector in Europe, a key area for digital transformation and sustainability, has seen a shift in the value of operations, but remains a major focus for the activities of M&A transactions and acquisitionsespecially in the mid-market segment, whose value declined less than overall. This sector is essential for companies looking to enhance their digital capabilities and take advantage of new technological opportunities such as AI, automation and quantum computing.

Looking ahead, the tech market in Europe, despite facing macro challenges, is poised for resilience. There's a notable shift in risk appetite, with buyers becoming more discerning and focusing on technology assets that demonstrate sustainable profitability. For corporates, digitalization remains a long-term strategic imperative, while private equity investors continue to prioritize investments in technology and software assets, especially those with reliable, subscription-based revenue models.

In conclusion, the European M&A market, particularly in the technology sector, is navigating a challenging yet opportunity-rich market. The shift towards mid-market transactions, the resilience of the tech sector, and the substantial dry powder available to private equity firms indicate that, despite current volatilities, the market holds promising prospects for strategic and transformative deals in the near future.

Want to have a closer look on the european M&A market trends?