There’s nothing people love more than a good comeback story. After a rough 2023, tech M&A in 2024 was slow to start but ended the year strong, with deal values up 32% from 2023, well outpacing the overall M&A market’s 10% growth in 2024. Over the course of the year, many of the headwinds that have slowed tech M&A activity since 2022 began to abate as interest rates moderated, the acquisition financing market returned and equity markets reached new highs. Notable deals included Synopsys’ pending $35 billion acquisition of ANSYS, Hewlett Packard Enterprise’s pending and recently challenged $14 billion acquisition of Juniper Networks, Siemen’s pending $10.6 billion acquisition of Altair, IBM’s pending $6.4 billion acquisition of HashiCorp and a Permira-led consortium’s $6.9 billion take-private acquisition of Squarespace.
So is tech M&A “back”? Not quite. The tech deal floodgates still haven’t opened, as persistent valuation mismatches, a still (mostly) closed tech IPO market, stiff competition and worldwide regulatory scrutiny continue to weigh on activity, particularly for VC-backed exits and mega deals. As a result, even as aggregate tech deal values increased year over year, overall deal volume was at an eight-year low and down 14% from 2023. Further, there were only three $10 billion+ mega tech M&A deals announced in 2024, all of which remain pending amidst the tough regulatory environment for the largest deals.
Moreover, serial strategic buyers – typically voracious buyers of VC-backed targets – largely remained on the sidelines. For example, the six biggest public tech companies (Apple, Microsoft, Alphabet, Amazon, NVIDIA and Meta) publicly announced only 13 acquisitions in 2024, which was up from the six-deal doldrums of 2023 but well off the 38 deals announced in 2022. Overall, the total deal value of VC-backed exits in 2024 increased modestly, but the data was skewed by a handful of large exits and we generally saw serial tech buyers focusing on smaller transactions as a way of dipping their toes back into the water. That said, Q4 was the strongest quarter for M&A involving VC-backed startups since early 2023 and we see signs of strong momentum heading into 2025.
With traditional sell-side exits more challenging and financing options at attractive valuations remaining elusive for most potential targets – particularly outside of AI – many VC-backed private tech companies explored all or mostly stock-for-stock private “merger of equals” transactions to remain competitive. But these deals remain tough to actually get done given their valuation and structuring complexities, post-closing integration and governance challenges, and extensive diligence required to avoid unwanted post-closing headaches (given the typical no-indemnity term).
Tech M&A may not be “back,” but its story is far from over. Let’s take a closer look at key developments in tech M&A during 2024 and what we could see in 2025.
Private equity back on the hunt
Acquisition financing markets reopened in full (albeit still at relatively high rates) over the course of 2024, which spurred an active year for private equity sponsors in tech across take-private acquisitions, private acquisitions and sponsor exits. Strategics staying on the sidelines made way for private equity to command top deals – private equity buyer activity accounted for 60% of the top 10 deals in the IT sector in Q2 and Q3 of 2024, reflecting a notable increase from Q1 of 2024, where strategic buyers dominated the top 10 deal list.[1]The technology sector is clearly a favorite of private equity, with private equity backing more technology companies over the past five years than companies from any other sector.[2] Private equity is also driving some of the AI boom, particularly for upstream beneficiaries like semiconductor companies, where deal value shifted towards private equity buyers by 14%.
Sponsors also continued to pursue take-private transactions. There were 19 take-privates of US-listed tech targets by private equity sponsors in 2024, up from 16 in 2023, and even approaching the 21 take-privates announced in each of the boom years of 2021 and 2022.[3] Of these take-privates, Thoma Bravo, Bain and Vista led the charge with two deals each, while Blackstone and Vista took the prize for the largest sponsor-backed tech take-private of the year with their $8.4 billion acquisition of Smartsheet. With debt financing now readily available thanks to the active private credit and syndicated debt markets, for larger take-privates, the availability of equity financing was more likely to be a gating item in 2024, with sponsors often unwilling to write equity commitments for individual transactions larger than $2 billion. As a result, many of the largest take-privates of the year were club deals and/or involved significant rollovers by existing investors – including the Squarespace acquisition and the $8.9 billion take-private of R1 RCM by TowerBrook and CD&R.
As one would expect, take-private transactions – particularly those involving controlling (or near-controlling) stockholders, Up-Cs and/or material rollovers – generate significant legal complexity and require careful planning and coordination among advisors to get done. For example, nine of 2024’s take-private targets used special board committees to help navigate potential conflicts. At the same time, sponsors and other controlling stockholders are increasingly foregoing the MFW safe harbor (and not seeking “majority of the minority” stockholder approval) for conflicted controller transactions in response to a perception that the Delaware courts will disallow the availability of the safe harbor for relatively immaterial process and disclosure defects. These buyers are instead relying on special board committees and enhanced disclosure to bolster their entire fairness records, betting that the enhanced deal certainty from foregoing a “majority of the minority” vote is worth facing a higher risk of post-closing deal litigation.
Chilling regulatory roadblocks to overcome in 2025
There’s no question that antitrust and foreign direct investment scrutiny in the US and globally weighed heavily on dealmaker confidence throughout 2024. However, perhaps counterintuitively, the time between signing and closing in US public tech deals declined year over year in 2024, demonstrating that “safe” deals can still get done – and fast.[4]
Let’s take a look at some of the key regulatory trends impacting tech M&A in 2024.
Antitrust and the effects of the Biden administration
While the early years of President Joe Biden’s term were replete with merger enforcement challenges in the tech sector,[5] 2024 was relatively quiet. This relative calm is certainly due in large part to a down year for tech M&A deal counts, but the Biden administration’s aggressive antitrust regime likely had a chilling effect on tech deal activity, with potential M&A transactions self-selecting out of the Biden administration’s regulatory environment. Even with limited deal volume, two transactions – Amazon’s proposed acquisition of iRobot and Qualcomm’s proposed acquisition of Autotalks – resulted in prolonged antitrust investigations and were ultimately abandoned in 2024. While the Federal Trade Commission (FTC) did not file a formal challenge in either matter, these deals faced foreign antitrust opposition, and the FTC investigated and issued statements claiming both deals threatened competition. By not formally challenging the deals and relying on foreign opposition, the FTC’s approach brought an investigation from Congress, with the chair of the House Committee on Oversight and Accountability asserting that, “[t]he FTC’s actions [in the Amazon/iRobot transaction] indicate […] that the FTC will work outside of U.S. antitrust law by using the EC [European Commission] to realize its desired outcomes.”[6]
A tale of ‘Tu’ cities – heightened CFIUS enforcement posture in US and new regulations for cross-border tech deals
The Committee on Foreign Investment in the United States (CFIUS) pursued an increasingly aggressive enforcement posture in 2024, announcing six new penalties on parties that failed to comply with various CFIUS requirements. Prior to 2024, CFIUS had issued only two penalties in its nearly 50-year history. The penalties ranged from $100,000 to $60 million – the latter levied against tech and telecommunications giant T-Mobile for violating terms of a negotiated national security agreement from its 2018 merger with Sprint.
Also swept up in the wave of enforcement was TuSimple, a global autonomous driving technology company, that settled with the regulatory powerhouse in the middle of 2024 for events that occurred in 2022. With a market cap of around $92 million (as compared to T-Mobile’s $253.19 billion), TuSimple felt the effects of a regulatory regime pivoting toward a standardization of compliance and away from negotiating modifications bespoke to each transaction – portending a shift in the cost-benefit assessments that parties make when considering whether to make a voluntary filing with CFIUS.
Now, smaller venture-backed tech companies are held to similar scrutiny and pressure as the Big Tech monoliths. Perhaps in a further sign of what’s to come, CFIUS concluded the year by issuing a final rule to further enhance its penalty and enforcement authorities by increasing minimum penalties to $5 million per infraction and expanding its subpoena authority to compel information from parties. In parallel with heightened enforcement of past violations, CFIUS continued its close scrutiny of transactions that were not notified to it.
For tech companies in need of capital, the regulatory landscape both at home and abroad offered little reprieve. The US Department of the Treasury (which chairs CFIUS) also issued a final rule to implement the long-awaited Outbound Investment Security Program (OISP) – sometimes referred to as the “reverse CFIUS” regime. The OISP is designed to stem the flow of capital from US persons to “countries of concern” – namely China – in support of Chinese development of key sensitive technologies that are critical to Chinese military modernization.[7] The OISP took effect on January 2, 2025.
Last year also saw several updates to foreign direct investment (FDI) regimes across the globe, which made deals more expensive, with increased diligence and compliance obligations and delayed deal timelines. Around the world, there is a renewed focus on investment in high-growth sectors, such as digital technologies, which is weighted against the need to reduce supply chain risks and dependencies. This is a difficult balance to achieve, particularly as governments are highly sensitized to the threats of hostile actors. Going forward in 2025, we expect to see more initiatives to grow the tech sector, but certainly no softening of FDI regimes in light of the current geopolitical climate.
2025 outlook
Looking ahead to 2025, although the media frenzy around the new administration is predicting a “buy, baby, buy” environment for M&A generally, the new administration will likely be “meet the new boss, same as the old boss” for Big Tech – with President Donald Trump’s picks to run the antitrust agencies having all stated a clear willingness to continue to aggressively pursue Big Tech. The first antitrust lawsuit by the DOJ under the Trump administration – to block Hewlett Parkard’s pending acquisition of Juniper for $14 billion – illustrates that Big Tech remains very much in regulators’ crosshairs despite a changing of the guards. For transactions in the tech industry that do not involve Big Tech, expect the agencies to dust off the traditional tools of antitrust, show more openness to facts that support deal clearance, and consider possible remedies that may resolve potential harms while still allowing the deal to proceed. The return to a more traditional antitrust analysis may be formalized if the 2023 Merger Guidelines, which drew significant opposition at the time of their introduction, are revisited, or (though less likely) rescinded in their entirety. It also could cause some deals that may otherwise have been put on ice to move forward. Still, don’t expect dealmakers to put their regulatory reverse termination fees or “hell or high water” obligations on the shelf – regulatory scrutiny is here to stay, and sellers must remain vigilant to protect closing certainty.
As a quick aside on process, the agencies issued rule changes to the Hart-Scott-Rodino (HSR) premerger notification program in October 2024, without any Republican dissents. Under the changes, there are significant new requirements for filers, such as disclosing competitive overlaps and supply relationships, submitting a greater number of transaction-related documents, and providing ordinary course materials, like business plans and reports. Barring a successful legal challenge, the new rules are expected to significantly increase the time and expense associated with certain HSR filings and could go into effect as early as February 10, 2025.
Activists’ crosshairs on tech
In 2024, 47 new activist campaigns were launched at US-based tech companies, representing approximately 19% of all public campaigns. As in past years, many of the campaigns at small-to-mid-sized tech companies (including Rapid7 and Wolfspeed) focused on “sell the company” campaigns – none of which have been successful to date. Meanwhile, larger targets, like Texas Instruments, were targeted for more operational- and capital allocation-themed campaigns. For a deeper dive into key activism trends in 2024, and what they mean for 2025, see Cooley’s shareholder activism year-in-review blog post.
AI goldrush bolsters tech M&A
While 2023 was a headline-making year for artificial intelligence (AI) M&A, with large tech companies investing in AI through acquisitions, 2024 saw companies of all shapes and sizes join the AI race and continue the AI M&A boom. In a 20% increase from 2023, 326 AI deals are expected to have closed in 2024. AI bolstered both tech M&A and overall M&A, as non-tech companies sought to scale their internal AI capabilities through acquisitions. For example, Thomson Reuters’ acquired Materia, an AI startup for the tax, audit and accounting profession. Private equity also is focusing on the AI sector – on average, in the last three years, 30% of all M&A deals in AI were done by financial investors.
Some companies struck gold in blockbuster deals, such as Cisco’s $28 billion purchase of Splunk to bolster Cisco’s generative AI capabilities. Other investors focused in on AI resource needs, including the $30 billion partnership between Microsoft and BlackRock to invest in data centers and energy infrastructure. These infrastructure investments (with deal sizes that tend to be higher than in the software sector) seem to be exceedingly relevant as the AI boom doesn’t show any signs of stopping. Dykema reports that more than 71% of M&A dealmakers expect to acquire companies offering AI capabilities or that successfully implement AI solutions in the next year. This same survey found that 53% of respondents expect generative AI technology to somewhat increase the value of sellers in M&A transactions over the next 12 months. With this growth in mind, companies that can facilitate the ever-expanding capabilities and demands of AI computing – including data-hosting sites and manufacturers – will likely be valuable acquisition targets.
For prospectors on the ground, while AI isn’t going anywhere, the relatively young stage of its technology means that dealmakers need to carefully consider how AI is used by targets. Given the nuanced confidentiality and compliance risks posed by these technologies, as well as other considerations, such as those relating to bias, hallucinations and intellectual property ownership, transactions are increasingly including AI-specific representations to address the risks. Relatedly, AI will continue to be a global focus area from a national security perspective, and regulatory developments are expected. Going forward, tech targets and acquirers exploring deals to capitalize on the AI goldrush should be prepared to conduct careful diligence assessing if and where AI is integrated into a business (whether purely internally, such as for back office applications or via third-party tools, or fully integrated into the product) and understand possible compliance issues, prohibitions, and any regulatory or notification requirements.
Looking ahead in 2025
We predict:
- At least five announced $10 billion+ tech deals, as strategic acquirers face an imperative to position their businesses to compete in the new AI economy.
- Large (but not mega) tech buyers ($30 billion – $200 billion valuations) continuing to drive significant M&A activity for both public and private targets – particularly in AI, cloud, cybersecurity and adjacent sectors, like semiconductors and data centers.
- More sponsors going clubbing, as private equity continues to turn to consortiums (both with other sponsors and pension funds and other institutional pools of capital) to fund large take-privates and tech carve outs.
- Defense tech deals increasing dramatically as rising geopolitical unrest continues to drive further innovation and VC investment in the space.
- Mega VC rounds (OpenAI, Databricks, Anthropic), a thriving private secondaries market, and the growth of continuation funds enabling private tech companies to stay “private for longer,” and also leading to ripple effects in the tech M&A market.
- An increase in large carve out tech divestitures and/or spinoffs, as proactive management teams and boards of mature tech companies (perhaps with the gentle or not-so-gentle push of activist investors) focus on their high-growth assets.
Don’t hold your breath for:
- A massive boom in PE-backed tech take-privates, as persistently high costs of capital and slowing target growth rates create persistent valuation mismatches between buyers and sellers.
- Mega-cap tech to resume major acquisitions in their core businesses, as continued global regulatory scrutiny remains an effective deterrent (tuck-in acquisitions, deals in adjacent verticals, commercial partnerships and minority investments, however, remain on the table).
- Dealmakers to relax their focus on stringent regulatory efforts and other risk-sharing provisions in merger agreements – in fact, the failure of Kroger / Albertson’s to close despite a very pro-seller regulatory efforts package will lead to further refinement of these provisions by dealmakers.
[1] PitchBook, Q3 2024 Global M&A Report, p. 12.
[2] Preqin Ltd.
[3] Deal Point Data, with Cooley analysis.
[4] For example, mergers of public tech targets with strategic buyers took an average of 110 days between signing and closing in 2024 as compared to 180 days in 2023 (a decrease of more than 48.2%); however, mergers of public tech targets with financial sponsors took an average of 114 days between signing and closing in 2024 as compared to 98 days in 2023 (an increase of more than 15%).
[5] For example, the FTC challenged Microsoft’s acquisition of Activision Blizzard, Meta’s acquisition of Within and NVIDIA’s acquisition of Arm, and the Department of Justice (DOJ) challenged Booze Allen Hamilton’s acquisition of EverWatch, all within the first two years of the Biden administration.
[6] US House of Representatives Committee on Oversight and Accountability, Comer Probes FTC’s Questionable Consultation with Foreign Officials to Block iRobot/Amazon Merger, May 1, 2024.
[7] The OISP prohibits or subjects to notification requirements certain investment and acquisition transactions involving US persons and entities with a qualifying nexus to China where the Chinese party is engaged in the semiconductor and microelectronics, quantum computing, or artificial intelligence sectors.
