Atlanta (May 21, 2024) – Inflation and interest rates played into a down year for dealmaking in 2023. But a new report from law firm Morris, Manning & Martin—the Emerging Tech Investment Report—goes beyond those two factors, surveying emerging tech companies and venture funds that invest in them on their dealmaking activity and expectations for the second half of 2024.
“While overall deal volume remained low coming out of 2023, continuing a trend from a lackluster second half of 2022, the deals made during this period provided companies with a temporary reprieve and likely set the stage for a more active second half of 2024,” said Nick Foreste, co-chair of Morris, Manning & Martin’s Emerging Companies & Venture Capital practice and the author of the report. “We expect a brighter forecast for the remainder of the year as valuation expectations normalize, cash flow obstacles persist, and credit markets likely become more attractive.”
The predicted surge in M&A activity is based in part on the fact that 90% of funds surveyed say they expect to take one or more of their portfolio companies to market this year. This would mark a break with 2023, which report data shows was characterized by “lifeline deals” that largely served to buy companies time. The report includes many other interesting data points, including:
- 65% of companies cited salary expense as one of their most challenging current workforce dynamic.
- In 2023, only 15% of surveyed companies participated in “down rounds” (financings that gave the company a lower valuation than previous financing rounds), with extension rounds being most common.
- 45% of fund respondents cited valuation disagreements as the biggest impediment to dealmaking last year.
- Tech investors reported an average multiple of 7x ARR for growing (but not yet profitable) tech businesses.
The survey was conducted from January to February 2024 and included internal and external respondents. The external respondents were two-thirds funds and one-third companies, and half of all respondents were in the Southeast. The rest were concentrated in the Northeast, West Coast and Midwest. Their investment stages ranged from Seed and Series A to majority investments and PE buyouts.
The full report can be viewed here.
About Morris, Manning & Martin, LLP
Morris, Manning & Martin (www.mmmlaw.com) is an Am Law 200 law firm with national and international reach. We dedicate ourselves to the constant pursuit of our clients’ success. To provide our clients with optimal value, we combine market-leading legal services with a total understanding of their needs to maximize effectiveness, efficiency and opportunity. MMM enjoys national prominence for its real estate, corporate, litigation, technology, healthcare, intellectual property, capital markets, environmental, international trade, and insurance practices. MMM has offices in Atlanta, Raleigh-Durham, Savannah and Washington, D.C.
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