According to a recent report by Solomon Partners, technology M&A has stagnated, but there is one area that is gaining momentum. Information, data and analytics.
Solomon Partners managing director Joe Watson said while it wasn’t the most attractive sector, it was gaining importance as economic uncertainty increased. However, it is also a sector that has been on the upswing for some time, featuring companies such as Verisk (VRSK), Moody’s and Equifax.
“The information and data services sector has become increasingly valuable over the past 10 to 15 years, as businesses have realized the need to capture data to drive decision-making,” Watson said. The whole industry is developing and getting more and more attention.”
Geopolitical and economic volatility also have a way of shaping the importance of professional data providers.
“The interest in the sector has also skyrocketed since the financial crisis,” Watson told Yahoo Finance. “It is too early to say how much of that is related to SVB, but history tells us that in times of crisis the business of providing data and information becomes more important. When do you need it most? When you’re not feeling well?”
So the investment continued. Despite a 14% decline in overall deal volume, information, data and analytics, M&A is expected to grow from 16 deals in the fourth quarter of last year to 35 deals in the first quarter of 2023. The report says the number has skyrocketed. The same applies to capital raising. At the end of last year he had 10 by funds targeting this sector and in the first quarter of 2023 he had 17.
Admittedly, these aren’t amazing deals. But in a market where dealmaking moves faster than it stops, it’s worth noting.
For example, one of the deals closed this quarter was the creation of Wilshire Indexes by financial services firm Wilshire. Wilshire Indexes, a separate entity of the Financial Times and Singapore Exchange, is a new data-focused venture.
“Are we headed for recession?”
Tech dealmakers are in a sort of prisoner’s dilemma. It’s not that they don’t have dry powder. The problem is flow he is one. With fewer exits, funding from US LPs has also declined.
“Both sponsors want to be buyers and are looking to exit old investments,” Watson said. Sponsors ask a lot of questions like, ‘Are we headed for a recession?’ There are concerns that there may be
Dealmakers don’t know where the macroeconomic environment will be in the near term, so there’s also a lot of ambiguity about what successful deals might look like now.
“There is uncertainty about what is good and what is bad and what is average,” Watson said. “Once some trades start to happen and interest rates start to become more certain, you will see market inertia start to loosen as interest rate uncertainty recedes.”
So the basic conditions are in place for dealmaking to rebound in a big way. The question is when.
“For some reason, we haven’t seen a dam break yet… Looking at the charts and data, we can see that, in theory, the fundamentals are in place for the trade to hit the market and complete. when.”
Ally Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on her Twitter. @agarfinks and LinkedIn.
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