Topic of the Quarter
Private Equity Skews Mid-Market Amid Tough Debt Environment
The Federal Reserve’s siege on inflation has induced a challenging financing environment. While middle-market private equity investment ($100M-$1B) is down 41% from its peak in late 2021, the decline is much less than the overall market decline of 74%. This segment also accounts for 76% of all U.S. PE deals year-to-date, up 10% over 2022. Furthermore, fundraising for middle-market focused PE funds is up 25% over last year, signaling investor confidence in this particular asset class.
Reduced availability of debt funding for large leveraged buyouts and more affordable valuations for smaller acquisitions are prompting private equity funds to target smaller deals. Covenant Review reports that leverage multiples have taken a 35% nosedive from 6.5x leverage in Q2 2022 to 4.2x in Q2 2023. This is the most significant dip recorded since they began monitoring this data in 2017.
For founders: non-backed founder-driven companies remain highly sought after investments for PE funds and are a worthy consideration for founders seeking an influx of capital or a partner. The interest of PE firms shifted toward this segment in late 2021 and we believe will continue to be a focus for the foreseeable future.
Notable acquisitions involving PE backers (listed below) include: Cobwebs Technologies, Logiq.ai, Infinia ML, Bonzo, TripBam, Aivo, Automation & Control, Bridge Core, Artemis Consulting, 3D Technology, Utilligent, DIY Home Center, and Tomorrow.
Founder-Led / Bootstrapped Deal Activity Snapshot
Q2 2023: Notable U.S. based M&A deals in Tech
Autonomy/IoT
7/26 – Electro Industries, power monitoring smart systems and devices, acquired by Hubbell Inc. for $60M Link
9/7 – Blue Force Technologies, design and manufacturing for autonomous aircraft, acquired by Anduril Link
Big Data & Machine Learning
7/11 – Cobwebs Technologies, threat intelligence analytics, acquired by Spire Capital Partners for $200M Link (PE)
8/16 – Logiq.ai, observability and monitoring platform, acquired by Apica via The Riverside Company Link (PE)
9/12 Infinia ML, automation and advanced ML platform, acquired by Aspirion Health Resources via Linded Capital Link (PE)
Data Center
7/25 – Multacom, colocation and data center operator, acquired by Edge Centres Link
9/13 – F3 Technology Partners, cloud and data center infrastructure services, acquired by Fulcrum IT Link
Software
7/19 – TripBam, travel management platform, acquired by Emburse via K1 Investment Managment Link (PE)
8/2 – Bonzo, automated mulit-communication software, acquired by MMI via WestView Capital Link (PE)
8/24 – Aivo, AI-enabled customer engagement SaaS, acquired by Engageware via Clearhaven Partners Link (PE)
9/7 – Transparency-One, supply chain and risk management SaaS, acquired by ISN Software Link
Professional Services
7/7 – Automation & Control Concepts, industrial automation integrator, acquired by Gray Matter Systems via Hamilton Robinson Capital Link (PE)
7/14 – OPS Consulting, mission-critical IT consultancy, acquired by The Swift Group Link
7/26 Bridge Core, IT and cloud services, acquired by NewSpring Capital Link (PE)
7/27 – Strongbow Consulting, data network optimization services, acquired by Accenture Link
8/21 – Artemis Consulting, IT and management services for govt, Acquired by Aretum via Renovus Capital Partners Link (PE)
8/22 – 3D Technology Group, Professional and managed IT services, acquired by Ovation Healthcare via Brentwood Capital Link (PE)
8/23 – Sealing Technologies, Cybersecurity integration and consulting services, acquired by Parsons for $200M Link
9/18 – Utilligent, management consulting services, acquired by E Source Companies via Align Capital Partners Link (PE)
eCommerce
7/31 – Nuzzie, D2C weighted blankets retailer, acquired by Cedar Brands Link
8/4 – DIY Home Center, online retail for home building products, acquired by DecksDirect via Harbour Group Link (PE)
9/27 – Tomorrow, eCommerce agency and consulting firm, acquired by Half Helix via BV Investment Partners Link (PE)
