Tech Company Valuations to Half in Two Years
According to estimates by Bain & Company, the average purchase price of a technology company reached a value of 13 times its EBITDA earnings in 2023. In 2022, investors paid an average of 15 times earnings, and a year earlier as much as 25 times earnings. Despite the sharp decline, 64 percent of technology sector representatives believe that there is still a gap in expectations between the price sellers want to get for a company and the amount buyers are willing to pay.
"The main reason for the weakness in M&A in the technology sector is the gap between sellers' and buyers' price expectations. Although valuations have fallen recently, investors are still not convinced about transactions due to the uncertain outlook for market development and the high cost of capital. On the other hand, sellers want to wait for the situation to improve and valuations to rise," Paweł Szreder, partner at Bain & Company, said.
Last year was the weakest year for the M&A market since 2013. The total value of transactions worldwide fell by 15 percent y/y to $3.2 trillion. This is half a trillion dollars lower than the result from 2022 and $2.8 trillion lower than the record-breaking 2021.
(WBJ)
