Overview: Tech Sector Leads M&A Activity

The technology sector consistently tops global M&A activity in both the number of transactions and often total deal value. In the first half of 2025, technology accounted for 78% of deal volume and 83% of deal value within TMT (tech, media, telecom) M&A. Tech’s dominance reflects rapid innovation and intense competition – companies frequently acquire rather than build to keep pace. Key drivers behind the tech M&A boom include: (1) short innovation cycles that spur acquisitions of emerging tech, (2) fierce competition for talent and intellectual property (leading to acqui-hires and patent-driven deals), and (3) an economy-wide push for digital transformation, which prompts companies in every industry to buy technology firms to modernize their businesses. These factors, combined with record cash reserves on corporate balance sheets and private equity “dry powder,” have made tech the busiest M&A sector year after year.

Tech M&A activity rebounded in 2024. After a global slowdown in 2022–2023, dealmaking in tech picked up momentum in 2024. Total global tech M&A value jumped to $740.7 billion in 2024, a 46% increase from $506 billion in 2023. This represented nearly 19–21% of all M&A value worldwide, making tech the single largest M&A sector by value. The U.S. market followed suit – North American tech deal value surged 27% year-over-year in 2024. This resurgence was fueled by a handful of very large transactions and improved market conditions (easing interest rates, recovering stock prices, and reopened debt financing channels). Notably, deal sizes grew even as deal counts fell: 2024’s aggregate tech deal value rose 32% from 2023, yet the number of tech deals hit an eight-year low (volume down 14% vs. 2023). In other words, buyers became more selective – focusing on fewer, bigger bets – after the frenetic deal volumes of 2021. The first half of 2025 has continued this trend of “higher value, lower volume.” Global tech M&A volumes in H1 2025 were about 11% lower than the prior year, but total values were 15% higher, reflecting a move toward larger, strategic acquisitions (particularly in AI) at higher multiples.

Key Drivers of Tech M&A

Several structural forces are propelling mergers and acquisitions in technology:

• Rapid Innovation Cycles: Technological evolution is relentless, and incumbents often find it more efficient to buy innovation than to build it in-house. As one market expert noted, once a tech segment matures, “big winners start to acquire other [companies’] technologies rather than doing it in-house…that’s the natural progression”. In fast-moving fields like AI, cloud, and fintech, established firms use M&A to leapfrog competitors or expand into new capabilities overnight. This “buy over build” mindset accelerates during pivotal innovation waves (e.g. cloud computing, mobile, now AI).
• Competition for Talent & IP: Acqui-hiring – acquiring startups primarily to gain their engineering teams or intellectual property – remains a common motive in tech M&A. The pool of top-tier tech talent (for example, AI researchers or cybersecurity experts) is limited, so larger companies are willing to purchase startups simply to on-board skilled teams and proprietary tech. In 2023, Big Tech firms were especially aggressive in AI talent grabs; Apple reportedly acquired ~32 AI startups in 2023, far outpacing its peers (Meta bought 18, Microsoft 17). These often-small acquisitions underscore that tech giants will pay for human capital and IP, not just revenue. For founders, this means that a highly skilled team or defensible technology can be a major selling point even if your company is young or pre-profit.
• Digital Transformation Across Industries: Organizations in traditional sectors (finance, healthcare, manufacturing, etc.) are racing to modernize via technology – driving them to acquire tech companies. This push for digital transformation has made enterprise software, IT services, and cloud solution providers hot M&A targets. In 2024 there were over 850 M&A deals in technology services (IT consulting, software implementation, cloud services), up from ~720 the year prior. Established corporations are buying tech startups to digitize their operations and better serve customers (for example, banks acquiring fintech startups, retailers buying e-commerce platforms). These “tech-for-transformation” deals are expected to continue as every industry becomes tech-driven.
• Abundant Capital and Need for Growth: Despite economic uncertainty, both strategic buyers and financial sponsors are cash-rich and seeking growth. Tech companies amassed record cash reserves in recent years, and private equity firms have significant dry powder (unspent capital). With organic growth rates leveling off for many software and hardware firms, acquisitions provide a quick path to boost revenue or enter new markets. In 2024, many corporations faced slowing internal growth and thus turned to M&A for expansion. Similarly, private equity buyers, after a cautious 2023, came roaring back to tech deals in 2024 as debt financing became more available – they view tech as a growth engine worthy of investment.
• Competitive and Defensive Plays: Tech M&A is also driven by competitive dynamics – companies acquire rivals or upstarts to consolidate market share or preempt threats. For instance, consolidation in crowded sub-sectors (like IT services, semiconductors, or video gaming) is partly defensive. Large incumbents may buy emerging competitors before they grow too disruptive (often seen in big firms snapping up startups with cutting-edge tech). Additionally, acquiring suppliers or distributors can secure supply chains (a consideration in hardware deals). Overall, staying ahead of competition – whether through scale or owning unique tech – is a powerful motivator behind many tech mergers.

Tech M&A Activity Trends (2023–2025)

From Boom to Reset to Recovery: The tech M&A market has whipsawed in recent years. 2021 was a record-shattering year for dealmaking (fueled by cheap capital and sky-high valuations), culminating in landmark transactions like Microsoft’s $68B Activision-Blizzard bid. 2022 saw a sharp cooldown as interest rates spiked and stock markets fell – tech deal volumes and valuations dropped, with many buyers pausing to recalibrate. By 2023, activity hit a low ebb: global M&A value fell further and tech deals were particularly sluggish in the face of economic uncertainty and regulatory scrutiny.

However, 2024 marked a turning point. Tech M&A “came back” in terms of big deals and total dollars, even though deal count remained depressed. As noted, global tech deal value rebounded by +46% in 2024, vastly outpacing the overall M&A market’s ~8–10% value growth. Several mega-deals in 2024 boosted the totals – e.g. chip design firm Synopsys’s pending $35 billion acquisition of Ansys, Hewlett Packard Enterprise’s proposed $14 billion purchase of Juniper Networks, and Siemens’ $10.6B bid for software maker Altair. Private equity also executed large take-privates like the $6.9B acquisition of Squarespace by a Permira-led consortium. Thanks to such big-ticket deals, tech deal value hit its second-highest level in history (only behind 2021), even with relatively fewer transactions.

Yet deal volume (number of deals) remained historically low in 2024 – in fact, the lowest in about 8 years. Many would-be sellers held off due to valuation mismatches, and some buyers stayed cautious given regulatory hurdles. The data shows a bifurcation: only three tech deals over $10B were announced in 2024, and all faced tough antitrust review, while at the smaller end, venture-backed startup exits were sparse aside from a few sizable outliers. Most acquisitions skewed smaller, reflecting careful, targeted plays. By late 2024, however, momentum was building: Q4 2024 was the strongest quarter for VC-backed tech M&A since early 2023, indicating that buyers were finally adjusting to new price levels and risk factors.

2025 (to date) shows cautious optimism. Early 2025 saw some headwinds – in the first half of the year, global M&A volumes were down about 9% year-on-year, as dealmakers digested shifting U.S. trade policies and other uncertainties. But the pipeline for tech deals remains strong, thanks to the AI investment boom and moderating economic pressures. In the U.S., Q2 2025 M&A activity actually increased in value (+6.4% from Q1) even as deal counts fell, suggesting confidence in high-value. June 2025 data underscores tech’s leadership: in that month, the tech sector led U.S. dealmaking with $38 billion in value across 40 deals, up from 37 deals a year – the highest among all sectors. Heading into late 2025, deal advisors overwhelmingly expect a further pickup in M&A activity, citing improved financing conditions and pent-up demand.

Takeaway: For tech founders evaluating an exit, the market climate has improved substantially from the doldrums of 2022–23. Big strategic acquirers and private equity firms are back in the hunt, especially for deals that fit their growth themes (AI, cloud, cybersecurity, etc.). While you may face more thorough due diligence and selective buyers, there is ample capital seeking tech acquisitions in 2025. The total volume of deals is still below peak, but this means acquirers are focusing on quality opportunities – if your company has what they need, now is a favorable time to engage. Just be mindful that the boom-era froth is gone: buyers today are price-disciplined and attuned to risks, making careful preparation and realistic expectations crucial (more on that in later sections).

Hot Sub-Sectors Driving Tech M&A

Within the broad tech industry, certain sub-sectors are especially hot in M&A activity. In 2024–25, four areas stand out as acquisition magnets: (1) Artificial Intelligence (AI), (2) Cloud Infrastructure, (3) Cybersecurity, and (4) Digital Transformation (enterprise software/IT services). These segments are seeing intense interest from buyers due to high growth prospects and strategic importance.

1. Artificial Intelligence (AI)

AI-related deals have exploded as companies race to stake their claim in the AI revolution. M&A involving AI startups hit record highs in 2024, and that pace is only accelerating in 2025. Globally, the total value of M&A deals for AI startups rose 288% in 2024 to $49.9 billion, with the number of AI deals up 53% to 454 transactions. In fact, by mid-2025, AI M&A value had already exceeded the full-year 2024 total. This deal frenzy is being driven by both tech giants and incumbents in other industries eager to acquire AI talent and technology. Rather than get left behind, larger firms are paying hefty multiples for companies developing AI algorithms, enterprise AI software, and data analytics tools. As one report noted, “AI has created a new era for M&A” with an estimated **$1+ billion of investment per day across R&D, capex, JVs, and acquisitions in the AI space.

High-profile AI acquisitions underscore this trend. For example, Meta recently acquired a 49% stake in Scale AI (a data labeling and AI infrastructure firm) for an enormous $14.8 billion, in conjunction with hiring Scale’s CEO to lead a new AI lab. OpenAI (itself an AI leader) acquired Global Illumination and the team of legendary designer Jony Ive’s AI startup for $6.4B, and also bought an AI code generation startup for $3B. Meanwhile Salesforce announced plans to acquire Informatica (an AI-powered data management company) for $8 billion. These are massive deal sizes, reflecting how critical AI capabilities are viewed – acquirers are willing to spend top-dollar to secure advanced AI platforms and expertise.

Equally notable is the flurry of smaller AI acqui-hires and tuck-in acquisitions. Industry giants like Apple, Google, and NVIDIA have been quietly snapping up dozens of AI startups in the $50–500M range. For instance, NVIDIA bought at least seven AI startups in 2024 (including Run.ai for a reported $700M) to bolster its AI software stack. SAP acquired an AI-driven user analytics firm (WalkMe) for $1.5B to boost its AI “copilot” offerings. Many other sub-$1B AI deals saw established companies buying cutting-edge AI teams – e.g. AMD’s $665M acquisition of AI model developer Silo AI. The motivation is clear: AI is transforming software and business processes, and incumbents either acquire AI innovation or risk falling behind.

Importantly, demand for AI talent is a huge factor. There’s an industry-wide shortage of experts in machine learning, large language models, and data science. Big Tech’s need for top AI engineers is “prompting a wave of acquihires” according to venture insiders. In early 2024, Microsoft went so far as to poach an entire AI startup’s team (Inflection AI’s staff) via a $650M licensing & hiring deal instead of a full acquisition – a move signaling that talent is as valuable as the tech itself. Startups with strong AI engineering teams are thus prime targets, even if their product is nascent. By late 2024, investors anticipated many overcapitalized AI startups (some of which raised frothy valuations during the 2021–22 hype) would seek exits or face shutdown, leading to “distressed M&A” where bigger players scoop them up for their talent/IP at more reasonable prices. In sum, the AI M&A boom is expected to continue through 2025, fueled by an arms race for AI expertise and the incorporation of AI features into all software.

For tech founders in AI, this is encouraging news – acquirers are plentiful (from FAANG giants to enterprise software firms to consulting companies expanding AI practices). Strong demand means potentially higher valuations for quality AI startups. But be aware that acquirers (and regulators) will scrutinize AI-related risks like data usage and model ethics during due diligence (more on that under “Challenges” below). Overall, AI is one of the hottest M&A segments, offering significant opportunity for well-positioned startups with defensible AI tech or talent.

2. Cloud Infrastructure and Semiconductors

The cloud infrastructure segment – encompassing cloud computing platforms, data center technology, and the semiconductor/chip companies powering the cloud – is another hotbed of M&A. As businesses migrate to the cloud and demand skyrockets for computing power (especially to support AI workloads), larger firms are acquiring cloud tech providers to scale up. Big Tech’s capital expenditure super-cycle on cloud and AI infrastructure is in full swing – for example, Microsoft committed ~$80B to build AI data centers and cloud capacity through 2025, and Meta is spending over $60B+ in 2025 on data center and AI investments. This massive investment signals a strategic urgency to expand cloud capabilities, which M&A helps accomplish quickly.

A notable trend is deals targeting semiconductor and hardware makers that support cloud and AI computing. For instance, in 2025 AMD acquired ZT Systems, a server hardware manufacturer (notably a major supplier of cloud servers), for $4.9 billion. Around the same time, SoftBank announced a $6.5 billion acquisition of Ampere Computing, a developer of cloud-optimized Arm processors. These deals underscore the race to secure next-generation chip technology and supply for cloud data centers. As AI drives demand for specialized chips (GPUs, NPUs, etc.), we’re seeing consolidation in the chip industry (e.g., Nvidia’s attempted Arm acquisition earlier, or Marvell’s deals) and strategic alignments like foundries partnering or merging. Even older-line hardware firms are in play: chipmaker NXP agreed to buy an analog chip supplier, and Intel and Tower Semiconductor attempted a merger (though that one fell through due to regulators). All of this reflects how critical scaling infrastructure is – whether via owning chip design talent or combining data center solution vendors – to meet the cloud/AI era needs.

Beyond chips, cloud software and services M&A is also active. Enterprises are adopting multi-cloud and hybrid cloud strategies, spurring acquisitions of cloud management platforms, DevOps tool makers, and IT automation firms. For example, IBM’s $6.4 billion purchase of HashiCorp (announced 2024) gave IBM a suite of cloud infrastructure automation tools. Cisco’s $28 billion acquisition of Splunk (completed in early 2024) was partly driven by cloud and security considerations – Splunk’s data analytics platform will bolster Cisco’s cloud observability and cybersecurity offerings. We also see traditional enterprise tech providers combining forces to compete in the cloud era, like Oracle’s 2022 $28B deal for Cerner (to expand in cloud-based health records) or Broadcom’s $61B takeover of VMware (to become a cloud software powerhouse) – although Broadcom-VMware faced delays, it ultimately closed in late 2023. These mega-deals highlight how incumbents use M&A to fast-track into the subscription-based, cloud services model.

Another facet is telecom and data center consolidation. Telecom operators and colocation/data center firms have pursued M&A to handle surging data traffic. Recent examples include American Tower’s acquisitions of data center portfolios and DigitalBridge’s investments, as well as cloud providers themselves acquiring real estate/data center assets for expansion. In the networking realm, the pending HPE–Juniper $14B deal would combine two networking hardware companies to better compete in cloud networking (though this deal faces regulatory review). Networking and cloud security are converging, leading to tie-ups like Cisco’s purchase of Viptela earlier and potentially more SD-WAN/cloud networking deals.

In sum, cloud infrastructure M&A is driven by scale and integration needs. The beneficiaries are companies that provide critical pieces of the cloud/AI pipeline – whether it’s cutting-edge chips, efficient servers, or software that helps enterprises manage in the cloud. For founders in this space, large players (from hyperscalers like Amazon, Microsoft, Google to hardware giants like Intel, and even private equity infrastructure funds) are actively looking for acquisitions that give them an edge in performance, cost, or capacity. Sub-sectors like AI chips, cloud cybersecurity, and cloud management software are particularly in demand. Expect the cloud M&A trend to continue as the world’s data and computing increasingly reside in cloud data centers.

3. Cybersecurity

Figure: Global cybersecurity M&A deals by year (number of announced deals, 2021–2024). Despite a slight dip in 2024 deal count, the second half of 2024 saw a strong rebound in security acquisitions.

Cybersecurity has emerged as a top-priority subsector for tech acquirers. In fact, a late-2024 survey found that dealmakers ranked cybersecurity as the #1 subsector of focus – even above AI – “underscoring risk mitigation as a priority” in tech transactions. With cyber threats proliferating, companies are highly motivated to acquire security capabilities and products. This has kept cybersecurity M&A robust even when other tech areas slowed. An analysis by SecurityWeek tallied 405 cybersecurity-related M&A deals announced in 2024, which, while slightly down from 2022–23 levels, was bolstered by a surge of deals in H2 2024 (the busiest half-year for cyber deals since early 2022). The vast majority of these involved North American targets (286 deals) and pure-play cyber firms (269 deals), indicating the U.S. remains the center of cyber M&A activity.

Not only are there many deals, but also significant dollars involved. In 2024, financial terms were disclosed for 68 cybersecurity acquisitions, totaling $50.8 billion in value. This was on par with 2023’s disclosed deal value (~$50.4B), but notably the mix shifted – pure-play cybersecurity companies accounted for a much larger share ($28B of the 2024 total, double the prior year’s $14B for pure plays). This suggests that acquirers are paying more for true cyber-focused targets, likely reflecting premium valuations for high-quality security assets. Indeed, 2024 saw 11 mega-deals over $1B in cybersecurity (8 of those involved pure cyber firms), up from 6 such deals in 2023. Examples include: Thoma Bravo’s $5.3B buyout of Darktrace (AI-driven threat detection), Mastercard’s $2.7B acquisition of Recorded Future (cyber threat intelligence), Gen Digital’s $1B purchase of MoneyLion (cyber-finance), CyberArk’s $1.5B deal for Venafi (machine identity security), and the largest – HPE’s $14B bid for networking and security firm Juniper Networks. (The HPE-Juniper deal, announced in 2024, underscores how even traditional IT companies are willing to spend big to integrate security into their portfolios; though as mentioned, it’s being challenged by regulators and not yet closed.)

Why so much interest in cybersecurity? First, cybersecurity is mission-critical for all organizations today – breaches and ransomware attacks make headlines regularly, so companies will invest heavily to protect data and systems. This makes security companies attractive, resilient assets (often with recurring revenue models like SaaS). Second, the cybersecurity vendor landscape remains fragmented, with countless specialized startups tackling cloud security, identity, endpoint protection, etc. Larger tech firms (and private equity consolidators) see an opportunity to roll up these solutions into more comprehensive platforms. For instance, private equity firm Thoma Bravo has famously acquired dozens of cybersecurity companies to combine and streamline offerings. In 2024, 55% of cyber deals were driven by PE firms or their portfolio companies in some markets. We also see non-security tech companies making acquisitions to add security features – e.g. Cisco buying Splunk (partly for its security analytics), or Google’s 2022 $5.4B acquisition of Mandiant to boost Google Cloud’s security services.

Another driver is that cybersecurity underpins digital trust – as digital transformation proceeds, enterprises need integrated security. This demand is fueling deals in areas like identity management (Okta’s acquisitions, for example), cloud security (posture management tools), and managed security service providers (MSSPs). SecurityWeek reported 119 deals in 2024 involved MSSP companies – indicating high activity in acquiring security service providers and consultants. Telecommunications and consulting firms have been buyers here, seeking to offer security-as-a-service. Additionally, geopolitical tensions and government requirements (like critical infrastructure protection, data residency laws) are prompting acquisitions: defense contractors buying cyber firms, EU companies merging to meet sovereignty concerns, etc.

For founders of cybersecurity companies, the exit market is healthy. Both strategic acquirers (tech giants, telecoms, defense firms) and financial sponsors are keen on quality security assets. Cyber startups that have a niche leadership (say in cloud-native security, zero-trust networking, or AI-driven threat response) are seeing strong interest. Valuations can be attractive, but keep in mind buyers are selective – they prefer companies with proven tech and customer traction, as the pool of security startups is large. Also, integration can be complex (aligning different security products), so having a clear value proposition for the acquirer’s platform helps. Overall, cybersecurity’s importance guarantees it will remain an M&A hotspot in 2025 and beyond, as organizations strive to stay ahead of evolving cyber risks.

4. Digital Transformation & Enterprise Software

“Digital transformation” – a broad term for modernizing business through software, data, and automation – continues to drive many tech acquisitions. This encompasses enterprise software (SaaS) companies, cloud software providers, IT consulting and services firms, and data analytics companies. Essentially, any business enabling other organizations to go digital is in demand. In 2024, M&A in the enterprise tech/services vertical surged, with 857 deals totaling $32.2 billion in value, up sharply from 722 deals ($7B value) in 2023. That fourfold jump in disclosed value (from $7B to $30B+) was aided by larger transactions and heavy private equity participation in the sector.

Several themes characterize these deals. One is cloud software consolidation: as businesses standardize on cloud applications, bigger software vendors have been buying smaller SaaS providers to expand their product suites. For example, HR and finance software giant Workday acquired several smaller cloud apps in 2024; database leader Oracle has been active in buying cloud marketing and healthcare software; and PE firms have taken many vertical SaaS companies private (to later combine or optimize them). Another theme is application modernization and integration – large enterprises are investing in tools to modernize legacy systems (e.g. migrating on-premise systems to cloud or updating old code). This drove deals like Cognizant’s $1.3B acquisition of Belcan (an engineering and IT modernization firm), and OpenText’s divestiture of legacy software to Rocket Software for $2.3B (as OpenText focuses on cloud content services).

Data analytics and AI-powered business software are also prime targets. The continued emphasis on data-driven decision making means companies are buying analytics and AI startups that can enhance their offerings. A notable example: ServiceNow’s acquisition of artificial intelligence platform Moveworks for $2.8B in 2025 to embed AI in enterprise workflows. Similarly, Salesforce’s (attempted) deal for Tableau in 2019 set a precedent; by 2024–25, many enterprise software firms have made smaller AI/analytics acquisitions to add capabilities (e.g. Zoom buying an AI translation startup). We also see industry-specific tech deals: for instance, in fintech (financial tech), incumbents like JPMorgan have acquired cloud fintech startups; in healthcare, firms like UnitedHealth’s Optum unit bought tech-enabled care companies. These are part of digital transformation within those verticals.

IT services and consulting M&A is another facet – consultancies are merging or acquiring specialist tech firms to meet client demand for digital transformation projects. An interesting 2024 deal: Ahead (a U.S. IT solutions provider) acquired CDI to create a “$3.7B digital transformation powerhouse,” combining capabilities in hybrid cloud, cybersecurity, and enterprise IT services. The fact that two private-equity-backed solution providers combined at such scale shows how services firms are consolidating to serve large enterprises globally. Additionally, global consultancies like Accenture and Deloitte have been extremely active buyers of smaller digital agencies, cloud implementation partners, and AI consulting startups – often doing dozens of tuck-in acquisitions per year – though many of those deals are undisclosed in value.

Overall, digital transformation deals are about capability-building. Companies in every sector want to accelerate cloud adoption, automate processes, and leverage data/AI – and they are acquiring tech providers that can deliver those outcomes. For founders running B2B software or IT service companies, this environment is favorable: if your product helps businesses become more efficient, data-driven, or customer-centric, there are likely both strategic and PE buyers interested. Keep an eye on larger software firms that may want to round out their platform with your feature set, or on “roll-up” players in your niche (for example, many mid-market CRM or e-commerce software vendors have been rolled up by private equity into bigger entities). Private equity, in particular, played a big role in 2024’s enterprise tech deals – over half (55%) of tech services deals were PE-backed, and “buy-and-build” strategies (multiple acquisitions to create a larger company) were common (roll-up deals rose to 38% of transactions from 25% a year before). This means founders might find an exit by selling to a PE sponsor that plans to merge your firm with others. Importantly, the focus in these deals tends to be on recurring revenue, customer base, and skilled workforce – so highlighting those strengths will help attract suitors in the digital transformation arena.

Strategic vs. Financial Buyers: Who’s Acquiring Tech Companies?

For a tech founder, it’s important to know who the likely acquirers are in this market. Broadly, buyers fall into two categories: strategic buyers (operating companies, including both tech industry giants and non-tech corporates) and financial buyers (primarily private equity firms or investment vehicles). Recent trends show activity from both camps, but with some shifts in behavior:

• Big Tech and Industry Strategics: The largest tech companies (think Apple, Microsoft, Google, Amazon, Meta, etc.) traditionally have been voracious acquirers, often gobbling up dozens of startups per year. However, in 2023–2024 their pace slowed somewhat, likely due to increased antitrust scrutiny and internal investment priorities. In 2024, the top six U.S. tech giants publicly announced only 13 acquisitions total, up from the extremely low 6 deals in 2023 but well below the 38 deals they did in 2022. Despite fewer splashy deals, these firms are still active quietly: as mentioned, Apple led in AI startup acquihires, and Meta, Google, Microsoft each targeted key tech (for instance, Google’s cloud unit sought large security acquisitions like the rumored $23B bid for Wiz that ultimately didn’t materialize). Outside of Big Tech, many mid-sized tech companies are strategic buyers too – firms like IBM, Oracle, Cisco, Adobe, Salesforce, etc., which routinely acquire smaller companies to fill product gaps. In 2024 Salesforce, for example, made multiple AI-related acquisitions, and IBM made a multi-billion cloud software acquisition (HashiCorp). Even some tech unicorns and emerging giants act as acquirers (e.g. Databricks and Snowflake have bought startups to extend their data/AI platforms). Additionally, non-tech corporates (strategic buyers from other industries) are in the mix when the target brings tech capabilities relevant to their field. For instance, large banks (JPMorgan, Goldman) have acquired fintech startups; automotive companies have acquired autonomous driving and AI firms; retailers like Walmart have bought e-commerce and logistics tech startups. These deals are driven by the digital transformation motive – the acquirer is usually trying to modernize its core business or enter a tech-driven market. For a founder, this means potential buyers aren’t only software or hardware companies; consider big players in the industry your tech applies to. A healthcare AI startup might be bought by a pharma or hospital conglomerate, for example.
• Private Equity (PE) Buyers: PE firms have become extremely influential in tech M&A. After a brief pullback in early 2023 (due to expensive debt), PE buyers came back strongly by mid/late 2024 as financing markets improved. By some measures, private equity accounted for 60% of the top 10 largest tech deals in certain quarters of 2024, and globally PE-backed buyouts made up one-third of all tech M&A value. Firms like Thoma Bravo, Vista Equity, Silver Lake, KKR, and others are actively acquiring tech companies, from large take-privates to mid-sized growth companies. In 2024, there were 19 take-private deals of U.S.-listed tech companies by PE sponsors, up from 16 in 2023 and nearly reaching the record highs of 21 deals seen in 2021–22. High-profile examples include Vista’s acquisition of Duck Creek Technologies, Silver Lake’s deal for Qualtrics, and the pending $3B take-private of Perficient by PE firm EQT. These investors are attracted to tech’s strong cash flows (in software), high growth potential, and the ability to streamline operations for profit (especially in mature software firms). Private equity buyers often execute a “buy-and-build” strategy – acquiring a platform company and then purchasing multiple smaller add-ons to create a larger entity. We saw this in action with many cybersecurity roll-ups and in vertical software (like software for real estate, education, etc.). In 2024, a majority (55%) of enterprise tech/service deals had PE involvement. Even in cutting-edge areas like AI, PE is playing a role: one analysis noted that in the semiconductor segment (crucial for AI), deal value share shifting towards PE buyers by about 14% as sponsors bet on the AI boom. Going forward, PE firms remain hungry for tech – in a 2024 survey, 57% of PE respondents expected to do more tech deals in 2025. With lots of capital to deploy and pressure from investors to generate returns, they will continue to seek acquisitions. For founders, selling to PE can look different than selling to a strategic: it might mean your company is merged with a competitor or carved out as part of a larger portfolio play. But it can be an attractive path, especially if strategics are not bidding. PE deals often allow founders some rollover equity (to stay invested) or to continue leading the business under new ownership. The key is that the tech sector is clearly a favorite of private equity, which bodes well for the breadth of exit options.
• Cross-Border and International Buyers: It’s worth noting that while U.S. buyers dominate in acquiring U.S. tech firms, there are also international players and cross-border deals. For instance, European and Asian tech companies sometimes acquire U.S. startups to expand into the market (e.g. a European fintech buying a Silicon Valley fintech). Sovereign wealth funds and international consortiums have also taken stakes in large tech deals. However, cross-border M&A faces extra regulatory review (CFIUS in the U.S., etc.), especially if it involves sensitive tech like semiconductors or data. Geopolitical factors (like U.S.-China tensions) have cooled some cross-border tech deals – e.g. Chinese buyers are less active in U.S. tech now due to regulations. Still, as a founder, if your potential buyer is overseas, know that regulatory approval might lengthen the deal timeline or even pose a risk (more on regulations below).

Bottom line: Both strategic and financial acquirers are actively shopping in the tech arena. Big strategics provide synergy and scale benefits – they may pay more if your product fits a key strategic puzzle for them. Financial buyers provide an alternate route – they value steady growth and may offer liquidity even when strategics are quiet. In 2025, with IPO markets only partially open, M&A is the primary exit route, so it’s a seller’s advantage to have multiple types of buyers at the table. Founders should cast a wide net and consider how their company’s story appeals to each type (e.g. strategic fit vs. standalone financial returns).

Challenges and Considerations for Sellers in Tech M&A

While the tech M&A environment is vibrant, selling a tech company is not without challenges. Founders should prepare for several factors that can affect deal success, valuation, and timing:

• Valuation Gaps and Market Volatility: One hangover from the 2021 boom is a gap between seller expectations and buyer willingness. Many startup founders remember the sky-high revenue multiples of a couple years ago, whereas buyers (and their shareholders) are now more value-conscious. This “persistent valuation mismatch” has been cited as a reason tech deal volume remained muted in 2023–24. In practice, it means you may get offers lower than what you hoped for during peak market times. The good news: valuations stabilized in 2024 and even ticked up modestly toward 2025 as interest rates eased. A survey of M&A bankers found 59% said multiples held steady in 2024 vs 2023, and ~20% saw an increase in pricing late in the year. If interest rates decline and growth picks up, multiples could even rise further in 2025. Nonetheless, founders should be realistic – you may need to adjust pricing or deal structure (e.g. include earn-outs or stock consideration) to bridge any valuation gap with buyers. In fact, experts advise shifting your mindset on valuation: focus on strategic fit and long-term value, not just headline price, and be open to creative structuring to get a deal done (such as taking stock in the acquirer to share upside, or performance-based payments).
• Rigorous Due Diligence (Especially for AI/Data Companies): As deals get larger and regulators more vigilant, buyers are conducting very thorough due diligence on targets. Tech companies must be prepared for deep scrutiny of their finances, customer contracts, intellectual property, cybersecurity practices, and more. Notably, if your product involves AI or large datasets, expect extra attention on data privacy, AI ethics, and compliance. Regulators in 2024 have ramped up enforcement around AI – the FTC penalized companies for misuse of AI and data (e.g. cases where AI models used biased or unlawfully collected data). Consequently, acquirers are now examining how AI models were trained and what data is in your systems. They will ask: Do you have rights to all your training data? Is any of it user data without consent? Does your AI output infringe IP (e.g. using copyrighted content)?. Deals can be delayed or even derailed if “dirty data” problems are found – buyers might demand that you remove problematic data or set aside special indemnities/escrows for these risks. As Morrison Foerster advised, “companies that use or develop AI should ensure good data hygiene to minimize these risks, especially if considering an exit”. In practical terms, get your house in order before sale: document data sources and licenses, shore up privacy compliance (GDPR, CCPA etc.), and address any IP ownership issues. Similarly, if your product is in a regulated space (fintech, healthtech), make sure you are in compliance, as buyers will check. For cybersecurity, demonstrate that your own systems are secure – no one wants to buy a tech company that will bring security vulnerabilities along.
• Regulatory and Antitrust Scrutiny: Governments have taken a harder line on big tech acquisitions, concerned about monopolies and national security. In the U.S., the FTC and DOJ have challenged a number of tech deals (for example, Visa’s attempted acquisition of Plaid was scrapped, NVIDIA’s Arm deal blocked, and even Microsoft’s Activision deal was delayed by global reviews). The current U.S. administration (as of 2025) remains strict on antitrust, though a change in administration may alter nuances (the new Trump administration might be slightly more open to remedies than outright blocks, per analysis). In Europe and the UK, regulators have also increased scrutiny, especially on data-centric mergers. What this means for founders: if your buyer is a big tech firm or a direct competitor, anticipate a longer road to closing. Large deals now often take over a year to close due to regulatory reviews. There’s not much a startup can do about this, but be mentally (and contractually) prepared for potential delay or even the risk of a deal not clearing. Some buyers include “regulatory outs” or extended long-stop dates. Ensure any deal agreement addresses what happens if regulators object (e.g. is there a break fee?). If your company’s assets could raise national security flags (say, sensitive semiconductors or personal data of citizens), CFIUS or other foreign investment reviews might come into play. Again, while the acquirer typically handles approvals, transparency about any government contracts, sensitive data, or foreign operations you have will help navigate this.
• Integration Challenges and Retention: Another consideration is what happens after the acquisition – which, while not directly your immediate concern, can influence the deal terms and your team’s future. Tech acquisitions can fail if cultures clash or if key talent leaves post-sale. Buyers know this, so they will evaluate how well your team might integrate and may structure retention incentives for key employees. As a founder, think about your willingness to stay on for a transition period (many deals will require you to stay 1-2 years, often with an earn-out or vesting); if you intend to leave sooner, that could affect the price or the buyer’s interest. Integration risk is especially a concern in mergers of equals or stock deals – 2024 saw some struggling “startup mergers” where two companies combined via stock to survive, but these are complex to pull off. If you pursue a merger as an exit, be aware of governance and cultural fit issues. Generally, if you find a strategic fit with the buyer, try to ensure there’s alignment on product roadmap and team roles ahead of time – that smooths integration and can make the buyer more confident (potentially improving deal value).
• Financing and Deal Structure: In 2023, high interest rates made it tough to finance leveraged buyouts, which limited some PE activity. By 2024, this improved, but debt is still pricier than the ultra-low rates of early 2020s. If you are considering a PE buyer, they may structure the deal with more equity and less debt, or even ask you to roll over equity. None of this is “bad,” just something to understand. Strategic buyers, on the other hand, many are cash-flush (e.g. Apple’s huge cash reserves) – but even they became more cost-sensitive. Some deals in 2024–25 have included earn-outs (contingent payments if the startup hits milestones) to bridge valuation disagreements. If a buyer proposes that, negotiate metrics that are achievable and clearly defined.
• Timing the Market: Trying to time an exit for the “perfect” moment is hard. M&A activity in tech is expected to rise going into 2025, but it also depends on macro factors (interest rates, economic growth, even stock market swings). A positive sign: many advisors think we’ve passed the trough of the M&A cycle and are on upswing. Another potentially important factor is the IPO market – if IPOs reopen broadly, some companies will choose to go public rather than sell, which could reduce M&A supply (and conversely, if IPOs stay limited, acquirers know M&A is the main path and might hold firm on valuations). In late 2024 there were glimmers of IPO activity (e.g. Arm, Databricks considering a direct listing, etc.), but not a full revival. For founders, keep an eye on these trends but ultimately focus on your company’s readiness. A well-performing company with buyer interest can transact in almost any market environment. That said, if you’re receiving inbound interest now (in 2025), it may be wise to engage – the current climate has many favorable elements (buyers with cash, enthusiasm for tech growth) that could shift if, say, a recession hits or if regulatory clampdowns increase.

Outlook: What to Expect in Late 2025 and Beyond

Looking ahead, the outlook for tech M&A is optimistic. Multiple industry analyses and surveys predict a further upswing in deal activity in 2025, barring any major economic shocks. Here are the key expectations and trends for the near future:

• Deal Volume Rebound: After the relatively low deal count of 2023–24, most experts foresee M&A volumes increasing in 2025. In one global survey, 79% of M&A advisors anticipated higher deal flow in 2025, with an especially bullish view in North America (97% of advisors there expect more deals). This optimism stems from the sense that we’ve hit the bottom in 2024 and conditions are ripe for expansion. For tech specifically, the combination of better financing conditions and strategic imperatives (AI, etc.) should bring many buyers back to the table. If economic growth remains positive (even if slower), companies will feel confident deploying capital for acquisitions.
• Ample Capital and “Animal Spirits”: Corporate balance sheets and private equity funds remain loaded with cash. Many companies delayed acquisitions over the last two years and now have pent-up demand to make strategic moves. As Lawrence Chu of Goodwin noted, factors like record cash reserves, the need to boost growth, and rapid AI innovation are all still in play fueling tech M&Ag. Should interest rates stabilize or decline and stock markets stay strong, it could unleash the so-called “animal spirits” of deal-makingg. In other words, confidence is a self-fulfilling driver – a stable environment could spur a flurry of deals as CEOs and boards regain their risk appetite. Already in late 2024, equity markets had recovered much of their lost ground, giving acquirers a stronger currency (stock) to use in deals and more assured valuations for targets.
• Focus Areas – AI, Cyber, Cloud – Will Continue to Dominate: The thematic trends discussed (AI, cloud, cybersecurity, digital enablement) are not fads; they are multi-year (even multi-decade) shifts. We expect AI-related M&A to remain red-hot. If anything, competition may intensify: companies that sat on the sidelines in 2024 watching the AI hype may decide in 2025 that they must buy an AI startup or two to stay relevant. The fact that deal values for AI targets in the first half of 2025 already surpassed 2024’s total suggests an accelerating trend. Cybersecurity, too, will remain a priority as new threats (and new security startups) emerge continuously. Consolidation in cyber is likely to produce a few more mega-deals (there is speculation that some large cybersecurity firms could merge or be taken private at hefty valuations). In cloud infrastructure, watch for possibly some historic deals – for example, if the political climate allows, one might see a major merger among chip companies or cloud service providers. However, regulatory factors will heavily influence this (e.g. an Oracle or IBM buying a big cloud rival would draw scrutiny).
• Private Equity’s Role Growing: All indications are that PE firms will be even more active. They have about $1 trillion in capital ready, and credit markets are easing. Many PE portfolio companies that were bought 5-7 years ago (particularly from the 2016–2018 vintage deals) are coming due for exits (“past their sell-by dates,” as one report quipped). This means PE-to-PE secondary sales or IPOs of those assets – but given the IPO market is lukewarm, sales to other PE or strategics are likely. Tech, being a top-performing sector, will see a lot of that activity. We might witness bidding wars between PE and strategic buyers for attractive tech targets (this happened in 2023 for a few software firms). For founders, this is good news – more competition can drive up valuations and deal options.
• Regulatory Environment – A Mixed Bag: On the one hand, some clarity may emerge by 2025. For example, the U.S. FTC/DOJ are set to release updated merger guidelines, and after the 2024 presidential election, policies could shift. PwC notes that if certain tariff and trade uncertainties resolve, new windows for cross-border tech deals could openp. Also, Europe’s strict stance might soften if economic pressures mount (EU has sometimes approved deals in exchange for remedies). On the other hand, big deals will still face heavy scrutiny, especially acquisitions by the largest tech companies. We likely won’t return to the laissez-faire environment of a decade ago; regulators worldwide remain wary of tech concentration. So while many small and mid-sized deals will sail through, any potential mega-merger (say, if two big semiconductor makers attempted to merge, or a Big Tech tried to buy another major player) would be uncertain. Founders considering an offer from a very large acquirer should factor in this regulatory risk (though ultimately it’s the acquirer’s issue to handle, it could affect the closing and timeline).
• Continued High Multiples for Quality: For high-growth or strategically critical tech companies, valuations could get frothy again. We already see competitive processes for sought-after targets. PitchBook data showed software PE deal value hit $134.8B in 2024 (up 32% YoY), partly because of big bids for AI-focused software companies. That suggests valuations in areas like AI software stayed high even when overall market was down. In 2025, as more buyers re-enter, we expect multiples to remain high for top-tier assets – possibly even inching higher in sectors like fintech, AI, and healthcare IT, where typical EBITDA multiples are already in the low-teens or higher. That said, average multiples across all tech might stay moderate if interest rates don’t fall much. In summary, the premium companies will command premium prices, while others might be more modestly priced or need to show profitability to get strong offers.

In conclusion, the trajectory for tech M&A is upward. As one law firm summarized, “sentiment in the global M&A market is optimistic” for 2025. For tech founders, this means an environment where buyers are active and motivated. The combination of stabilized economic conditions, the transformational tech trends (AI/cloud), and lots of capital suggests a healthy M&A market going forward. Of course, external shocks (recession, geopolitical conflict, etc.) could dampen things, but absent that, 2025–2026 should be strong years for tech exits.

Tips for Tech Founders Preparing for a Sale

If you’re a tech founder considering selling your company, here are key considerations and tips to ensure a successful M&A process in the current climate:

• Understand What Buyers Want: Put yourself in the shoes of potential acquirers. What strategic value do you offer – is it cutting-edge technology, talent, customer base, or revenue growth? Different buyers have different motivations. Many tech acquisitions today are motivated by obtaining technology/IP or teams (not just current profits). For instance, large companies often acquire startups to absorb their innovative tech and engineering talent rather than to add immediate revenue. So highlight the uniqueness of your tech and the strength of your team in any discussions. Also, know the trends: a recent survey showed 47% of tech dealmakers are most interested in AI/ML targets, and cybersecurity was the top focus subsector. If your company plays in one of these hot areas, emphasize that. If not, frame your story around how you complement those trends (e.g. your software could benefit from AI integration by a new owner). In short, tailor your pitch to the buyer’s strategic needs.
• Get Your House in Order (Due Diligence Readiness): Before entering a sale process, clean up any issues that could be red flags. This means ensuring your financial records are accurate and up to date, your IP is properly documented (patents filed, code ownership clear), and your legal matters (employee contracts, vendor agreements, etc.) are in order. Pay special attention to data privacy and compliance if applicable – as discussed, acquirers will deeply examine data usage in AI models, user privacy compliance, open-source software licenses, and more. Proactively addressing these will save time and build buyer trust. It can be wise to do an internal audit or a “sell-side due diligence” with help of advisors to identify any skeletons in the closet. Common issues to fix include: resolving any co-founder or shareholder disputes, cleaning up your cap table, securing any third-party consents needed for an acquisition (like key customer contract clauses), and shoring up cybersecurity practices. The smoother your diligence goes, the faster and more confidently a buyer can move to closing.
• Be Realistic on Valuation and Deal Structure: Determine a reasonable valuation range based on market comps and your growth metrics. While tech valuations are improving, buyers are still disciplined. It’s often better to engage with a realistic price in mind than to shoot for an exorbitant number that scares off credible buyers. Also, be open to deal structures beyond 100% cash. Many deals now involve some stock consideration (if the buyer is public, taking some stock can let you share in upside) or earn-out payments contingent on hitting performance goals. For example, if a buyer is concerned about future revenue, an earn-out can bridge the gap – part of the price is paid later if you achieve, say, $X million in sales post-acquisition. This can actually maximize value if you’re confident in growth. Just be sure any performance targets are clearly defined and achievable. Additionally, keep in mind that interest rates are higher than a few years ago, so if a PE-backed deal is on the table, they may leverage your company with debt – don’t be alarmed, but do your diligence on their plan and ensure it’s sustainable for the business.
• Plan for Integration and Retention: Think about what you and your leadership team want post-acquisition. Do you envision staying with the company under new ownership for a while, or exiting quickly? Buyers will want to know this. If the business is heavily dependent on you or a few key people, expect the buyer to insist on retention agreements (e.g. golden handcuffs in the form of retention bonuses or rolled equity). It’s wise to stabilize your second-tier management and delegate responsibilities before a sale, so the company is not solely reliant on the founders – this can both improve valuation and make integration easier. Culturally, research the acquirer’s environment; if preserving your company’s culture is important to you, discuss that during negotiations (some acquirers operate very independently, others will assimilate your team). For employee retention, sometimes acquirers set aside a pool for employee bonuses – you can advocate for your team to be taken care of, not just the shareholders. After all, the buyer is acquiring your talent, so they have incentive to keep them happy.
• Navigate Regulatory and Legal Hurdles Proactively: If you suspect your company or the deal could raise regulatory flags (e.g. you operate in a regulated industry, or the buyer is a large competitor), address it upfront in discussions. Ensure you have any licenses or certifications in good standing. If foreign investment approval might be needed (say you have a foreign investor or operations), flag that early so the buyer can plan for filings. It often helps to have experienced legal counsel who can anticipate these issues. For example, if your product deals with personal data of EU citizens, a buyer will worry about GDPR – having documentation of GDPR compliance ready can ease their concerns. Essentially, reduce uncertainty for the buyer on all fronts, including legal/regulatory.
• Timing and Competitive Bids: When you decide to sell, create a smart process. If possible, get multiple bidders involved – nothing boosts value and speed like competitive tension. Even if you have an attractive offer from one party, consider reaching out (through an advisor or banker) to a few other likely buyers to gauge interest. But also be careful with timing – leaks of a sale process can distract your team or signal weakness, so try to keep things confidential and move efficiently. The current market outlook suggests 2025 is a promising time to sell, but also remember that windows can close. If your business is performing well, you might want to capitalize on the favorable market rather than risk a downturn in a couple of years. Many founders regret “waiting too long” and missing a peak. That said, don’t rush unprepared – balance readiness with opportunity.
• Leverage Professional Advice: Finally, engage experienced advisors (investment bankers, M&A attorneys, etc.) if your company is of a meaningful size. They can help position your story, run a process, and negotiate terms to your advantage. M&A is complex – terms around representations, indemnities, escrow holdbacks, etc., matter a lot for your outcome. Having experts to guide you can significantly de-risk the transaction and ensure you get full value. Even for smaller deals, a good lawyer is essential to protect your interests in the purchase agreement.

By keeping these considerations in mind, tech founders can greatly improve their chances of a smooth and successful exit. The current M&A climate offers tremendous opportunities for those who are prepared. Tech is the sector to watch in M&A, and many founders will rightly see 2025 as an opportune moment to make their move. With a solid growth story, clean operations, and awareness of market dynamics, you can navigate the deal process and achieve a rewarding outcome for you and your stakeholders.

Sources

• PwC – Global M&A Trends in Technology, Media and Telecommunications: 2025 Mid-year Outlook (source)
• Cooley – 2024 Tech M&A Year in Review (Feb 2025) (source)
• Goodwin Law – Tech M&A Poised for Growth in 2025 (Feb 2025) (source)
• Morrison Foerster – M&A in 2024 and Trends for 2025 (Jan 2025) (source)
• EY – Connecting the Dots: Tech Services M&A in 2024 (source); US M&A Activity Insights July 2025 (source)
• SecurityWeek – Analysis: 400+ Cybersecurity M&A Deals in 2024 (source)
• PYMNTS (Mergermarket data) – AI Startup M&A Deal Volume Hit Records (source)
• Business Insider – Wave of AI acqui-hires coming (May 2024) (source)
• CRN – Biggest Tech M&A Deals of 2024 (So Far) (source)
• Capstone Partners/IMAP – Global M&A Trends Survey Report 2024-2025 (source).