Preparing for exit: A buyer’s market for high-tech assets is here

Technology trading volume has slowed since mid-2022 for a variety of reasons, including rising interest rates that limit the amount of money that can be borrowed and falling asset values ​​as buyers are no longer able to meet sellers’ asking prices. Successful deals rely on higher equity contributions (expected to be refinanced later), partial sale of equity to fund growth, and a higher proportion of add-ons than standalone or platform assets . Overall, the pace of tech deals beyond Q3 2022 remains slow, as does the broader deal market.

Exits are also down, averaging around $20 billion per quarter in the first half of 2023, compared to an average of $107 billion per quarter in the first half of 2021 and $75 billion per quarter in the first half of 2022. From 2018 to 2021, more than $700 billion of high-tech assets were purchased (see Figure 1), and the holding periods of high-tech portfolio companies were lengthened. In 2023, almost half of the tech portfolio companies have been held for more than four years, and 15% have been held for more than six years. For the first time since 2012, more than 40% of the tech portfolio companies have been held for more than four years (see Figure 2). This backlog of long-held portfolio assets is growing faster than the stable pile of dry powder, and increased activity will create a buyer’s market. Stuck in Place: Private Equity Midyear Report 2023”).