It's been a tough year for M&A, both in tech and at-large. However, the deal flow hasn't come to a complete stop, RBC Capital Markets Managing Director and Co-Head of Global M&A Vito Sperduto told Yahoo Finance Live.
Take Thoma Bravo’s $4 billion take-private of Coupa Software (COUP). Sperduto called the deal “a great highlight of what you see in the marketplace.”
“Part of what you’re seeing is that they're finding different ways to get the deal done,” he said. “So, versus the traditional bank financing you'd see for the debt, [Thoma Bravo] went to direct lenders. So, 19 parties provided $2.6 billion worth of capital. That's pretty significant ... [The direct lending] marketplace has taken prominence while the traditional financing sources aren't really available with the volatile environment," he said.
Looking ahead, tech companies and healthcare companies have a lot of cash on hand, according to Sperduto.
"I think CEOs have tended to be more conservative, they've wanted to be more liquid," he said. "They don't want to get caught again, like they did in '08, '09. If you look at the sectors that have the largest cash piles – tech and healthcare. If you look at the sectors that are the most active from an M&A perspective – tech and healthcare ... I think we're going to see a fair bit more from a technology consolidation perspective."
Pitchbook Senior Analyst Robert Le told Yahoo Finance Live that, in terms of deals that are getting done, he's seeing "more infrastructure investments, a lot more metaverse gaming investments." Simultaneously, Le is also seeing "a huge decline in investments in centralized crypto services, like Celsius, BlockFi, wallets, exchanges, crypto on-ramps, all of that." For now, FTX's ignominious, real-time collapse has driven investors away from crypto.
"Investors have really shied away and deployed capital elsewhere," he said.
What might be coming down the pike in 2023
The overall deal outlook next year, in tech and beyond, is fragmented. Sperduto isn't expecting much out of the first half of the year, but is expecting substantial pickup by the latter part of the year.
"If I look into '23 right now, certainly, the first quarter is going to be challenged," he said. "I do think the second half of next year is going to be extremely strong, primarily because we're going to see a lot of deals that people are planning to bring out. So, if I look at our own pipeline right now, there's a significant amount of volume that's expected in the second half of next year."
Le is also eyeing a return to VCs investing more substantially in the latter half of 2023, as well.
"We do believe venture funding will continue to decline well into next year, but we do expect it to bottom out sometime before the summer," Le told Yahoo Finance. "We expect it to trend upwards sometime later in 2023, but we're being cautiously optimistic here."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.
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