The Rise of Private Equity in Technology M&A
In a previous blog post, we explored the role of Private Equity (PE) investors in the technology M&A landscape (read it here). We briefly touched on how tech’s growth potential and high returns have drawn PE investors into the sector. This month, we’re diving deeper into this trend, analyzing PE’s increasing involvement in tech over the past decade and how macroeconomic cycles have influenced this shift.
The chart below illustrates PE deal activity in North American technology companies and its share of total M&A activity (%) since 2016.
Pre-COVID Era (2016–2019)
PE’s share of tech M&A rose from 24.1% in 2016 to 33.2% in 2019, driven by several key factors:
- SaaS and Cloud Adoption – The widespread shift from legacy on-premises solutions to SaaS and cloud-based models introduced recurring revenue streams. These were particularly attractive to financial buyers, especially companies with strong revenue retention metrics (learn more here). This trend fueled rapid growth for industry giants like Salesforce, Google Cloud, and AWS, increasing valuations and investor interest.
- Digital Transformation Across Industries – Traditional sectors such as finance, healthcare, and retail saw accelerated digital adoption. This drove demand for IT services, including technology consulting and Managed Service Providers (MSPs).
- Cybersecurity Investments – High-profile cyberattacks, such as the 2017 Equifax breach, alongside new regulations like GDPR (2018) and CCPA (2019), heightened cybersecurity concerns. This led to significant investments in cybersecurity software, consulting, and Managed Security Service Providers (MSSPs).
These trends significantly contributed to PE’s growing presence in tech M&A and remain relevant today.
COVID Era (2020–2022)
The early days of the pandemic caused M&A activity to pause as uncertainty loomed. However, as remote work became the norm, investment in technology surged. Digital transformation was no longer an emerging trend—it was an immediate necessity.
During this period, PE investment in tech increased modestly from 33.6% in 2020 to 36.4% in 2022. Two key drivers were:
- Surging Demand for Digital Solutions – Businesses rapidly adopted cloud-based and remote collaboration tools, accelerating the need for tech investments.
- Low Interest Rates – Favorable monetary policy fueled leveraged buyouts (LBOs), a core strategy for PE firms, enabling them to execute more deals.
While PE’s share of deals grew incrementally, overall M&A volume expanded, indicating that strategic buyers were also capitalizing on favorable conditions through acquisitions and sector consolidation.
Post-COVID Era (2023–2024)
Although PE’s share of tech M&A continued to grow, overall deal activity slowed post-pandemic. Rising interest rates reduced the appeal of LBOs, and many sellers held off on transactions, awaiting better market conditions.
2023 saw a low in deal volume, while 2024 served as a transition year, with PE’s share rising to 38.1%. This increase was partially driven by the need to deploy record-high dry powder from funds raised in 2020 and 2021.
Current Era (2025 & Beyond)
As of March 24, 2025, overall deal volume has yet to meet optimistic expectations, but PE involvement continues its upward trajectory, now accounting for 38.5% of total tech M&A. Market conditions have steadily improved since late 2024, and while it may take time for deals to materialize, much of the buyer activity is PE-driven.
Looking ahead, PE’s share could approach 40%. However, macroeconomic risks such as tariffs and geopolitical instability could impact investment. Still, with significant dry powder available, more high-quality companies are considering M&A, setting the stage for continued PE activity in the tech sector.
Thanks for reading! If you have any questions about M&A, feel free to reach out here!