Thomas Parry
by Thomas Parry
Tom Parry is an experienced M&A professional, currently working as a Manager at Regent Assay, having taught Economics and International Business at the University of Nottingham. Contact Tom.
During the Covid-19 pandemic, supermarket shelves gathered cobwebs, cars motionlessly filled driveways, and gym memberships were unceremoniously cancelled. In an attempt to navigate a world devoid of human contact, people turned to technology to maintain a semblance of normality, and the value of technology companies, both public and private, skyrocketed. Fast forward two and a half years, and Apple’s value stands at USD 2.51 trillion (capIQ, July 2022), down from the heady heights of USD 3 trillion that it achieved earlier in 2022. The NASDAQ is down almost a quarter on the year, and private investors are daring to use the “P” word – profitability – having been content to burn through capital for the past two years or so.
Such a shift, twinned with various global macroeconomic headwinds, may be interpreted by some to be a seismic change in the investing landscape. However, it is most likely to be a correction following an unprecedented period of easy money from both private and government sources. Tech speculation during successive lockdowns and the hysteria surrounding new segments such as NFTs, facilitated this surge in valuation based on speculation rather than true potential or earnings. And whilst tech multiples have decreased in past months, the SaaS Median EV/TTM Revenue Multiple having dropped from 8.0x in the third quarter of 2021 to 6.4x in the second quarter of 2022 (Software Equity Group: 2Q22 SaaS M&A Update, p.16), they are still very healthy and the envy of other, more traditional, balance sheet-heavy industries.Tech is also more diversified than ever, and debatably, not all “tech” is actually “proper tech”. This is a rabbit hole we won’t jump down today but the point can be made that while some subclasses, such as SaaS, have held up well, others, such as Fintech have truly felt the wrath of this market’s correction. Again, this is not all bad news and has led to M&A opportunities within the sector:
It is clear that there has been a major correction in the first half of 2022 and that multiples and share prices have become much more reasonable. However, the value of tech companies in general still far exceeds those of more traditional industries. Tech is still en vogue, just not to the same extent as it once was.
GCG Member FirmRegent AssayLondon, Birmingham, UKT: +44 121 200 3800Corporate Finance, M&A
Regent Assay (formerly Assay Corporate Finance) is a unique mergers and acquisitions boutique, with a specialist TMT focused team, looking after the corporate finance and advisory needs of a diversified portfolio of high-profile UK and international clients, supporting transactions in the GBP 5m - 50m deal size.