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The US and European markets both experienced a slight dip in total deal counts QoQ. However, the number of $100M+ deals in these regions is on the rise, signaling that more buyers are willing to stomach large acquisitions for the right target.

Key Q3’23 tech M&A insights include:

• • The slowdown in tech M&A is largely driven by risk-off strategic acquirers, with financial sponsors also treading carefully amidst a scarcity of high-quality assets and macroeconomic uncertainties.
  • Valuation step-ups for institutionally-backed M&A targets have dropped to 0.7x compared to the valuation given at their last equity round — down from 1.5x in the previous quarter.
  • Europe has emerged as a formidable player in tech M&A volume, with a more than 80% QoQ increase in $100M+ deals — challenging the US in both deal volume and high-value transactions.
  • Big tech M&A activity has come to a standstill in Q3 with no significant deals announced, reflecting the impact of a stringent regulatory environment.
  • Contrary to the overall trend, billion-dollar M&A deals have risen by 50% from a recent low in Q1’23, with 21 such deals taking place in Q3. More broadly, the median valuation for M&A targets has continued to rebound, reaching $41M in Q3’23.

For a detailed analysis of the current tech M&A environment, including strategic moves by key players and regional dynamics, CB Insights clients can access the full Tech M&A Q3’23 Report by signing in and downloading it using the sidebar.

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Per the CB Insights Tech M&A Q2’23 Report, the number of $100M+ M&A targets grew 24% quarter-over-quarter in Q2’23 to reach 68. That level is still 31% below where it was during the same period in 2022.

Of the $100M+ deals inked in Q2’23, more than half were in the $100M-$499M range, while just under a third were billion-dollar deals.

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Cross-border deals involve a buyer from one country acquiring a company headquartered in a different country, and they can help companies expand into untapped markets and acquire new customers.

With 317 transactions of this kind in Q2’23, Europe did almost as many cross-border deals as all other regions combined (324). Europe’s propensity for cross-border M&A could in part be fueled by the EU members’ shared regulatory frameworks and closely overlapping markets.

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However, the median valuation per employee for tech M&A deals started to fall as the sector watched private-market valuations deflate across stages. That figure eventually bottomed out at just under $600K in Q1’23.

Notably, in Q2’23, it rose for the first time since Q4’21 — jumping by around $120K quarter-over-quarter (QoQ) to surpass $700K, per the CB Insights Tech M&A Q2’23 Report.

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After the boom times of 2021 and early 2022, valuations had a long way to fall when the market turned sour. By Q4’22, the median M&A valuation for institutionally backed companies was just 0.6x the valuation of their previous round. This rebounded slightly in Q1’23 to 0.8x — still a discount vs. the prior round and a potential loss for any later-stage investors.

Institutional investors likely breathed a sigh of relief in Q2’23, when M&A targets saw a median valuation step-up of 1.4x over their previous round, according to the CB Insights Tech M&A Q2’23 Report.

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Historically, big tech players have snapped up startups to acquire tech talent and expand into new markets and product lines. However, they face a more challenging regulatory climate — especially in the US and Europe, where anti-trust pressure has been mounting.

Combined with the prevailing risk-off mentality of strategic acquirers, this has led to a drastic decline in big tech acquisitions. Between Amazon, Apple, Google, Meta, Microsoft, and NVIDIA, only Apple disclosed an acquisition in Q2, according to the CB Insights Tech M&A Q2’23 Report.

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While the continent’s M&A deal volume ticked down 4% quarter-over-quarter (QoQ) in Q2’23, it remains elevated compared to pre-2021 levels. For comparison, tech M&A volume in the US has slumped to levels not seen since 2020’s Covid lockdowns.

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The CB Insights Tech M&A Q2’23 Report highlights that the number of M&A transactions by corporations has eroded in the quarters since — hitting just 1,728 in Q2’23 as economic uncertainty and rising interest rates have driven corporations to become firmly risk-off when it comes to tech M&A.

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The US M&A market remained tepid, with US-based tech M&A transactions falling 9% QoQ and trailing Europe for the sixth quarter in a row. That said, US target companies are still attracting larger valuations: 41% of the M&A targets valued at $100M+ in Q2 are headquartered in the US.

Other Q2’23 tech M&A highlights include:

• Though still below 2021 highs, the number of M&A targets valued at $1B+ rose to 21 in Q2, up from 14 the prior quarter. Billion-dollar deals comprise just 1% of all M&A activity. 
• After 2 quarters in decline, the median valuation for M&A targets rebounded in Q2, nearly doubling to $45M.
• Buyers paid more per employee in Q2’23 than in the previous quarter, with the median valuation per employee rising to $700K, up $120K QoQ. 
• In Q2, companies acquired for $100M+ had a median headcount of 359 people — the highest in 10 quarters.

• For institutionally backed targets (i.e., those previously backed by VCs, PE, etc.), M&A valuations in Q2 were 1.4x the last round’s valuation — a notable rebound after 2 depressed quarters.
• Big tech M&A activity hit an 18-quarter low, with just 1 deal in Q2, reflecting the more challenging regulatory (anti-trust) climate that big tech players are facing.
• Cross-border M&A deal activity fell 9% QoQ but remained above historical levels, driven by higher volumes between countries in Europe, as well as between Europe and the US.

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