This article is part of Bain’s 2023 Technology Report.
The volume of technology deals has slowed since mid-2022 for a number of reasons, including limited debt availability amid rising interest rates and declines in asset values that have left buyers unable to meet sellers’ asking prices. Successful deals have relied on greater equity contributions (with expectations to refinance later), partial equity sales to fund growth, and a greater proportion of add-ons rather than standalone or platform assets. Overall, the pace of tech deals since the third quarter of 2022 continues to be slow, in line with the broader deal market.
Exits are also down—on average, about $20 billion per quarter in the first half of 2023 compared with $107 billion per quarter in the first half of 2021 and $75 billion per quarter in the first half of 2022. A growing backlog of deals, including more than $700 billion of tech assets purchased between 2018 and 2021 (see Figure 1), has led to longer hold times of tech portfolio companies. In 2023, nearly half of tech portfolio companies have been held for more than four years, and 15% have waited more than six years. For the first time since 2012, more than 40% of tech portfolio companies are being held for more than four years (see Figure 2). This backlog of long-held portfolio assets is growing more quickly than the mountainous level of dry powder that is holding steady, which will create a buyer’s market when activity picks up (for more, read Bain’s “Stuck in Place: Private Equity Midyear Report 2023”).
Tech deals have slowed over the past year, and a backlog of deals points to a coming buyer’s market
