Press Release

MoFo Survey: Tech M&A Leaders Mostly Bullish about Deal Activity for Next 12 Months, but Forecasts are Cooling

The survey shows dealmakers anticipate market changes, with cross-border deals, valuations, and tech IPOs most impacted

04 Nov 2019

San Francisco (November 4, 2019) – Morrison & Foerster, a leading global law firm, today announced the results of its annual Tech M&A Leaders’ Survey, which reveals dealmakers are becoming increasingly split on what lies ahead for deal activity in the technology space. According to the findings, the majority of dealmakers expect activity to increase over the next 12 months (40%), while 32% predict activity will remain the same, and 28% anticipate a decline.

Although most dealmakers remain bullish, the results show a narrowing gap, with more respondents delivering a cooler forecast than they did in October 2018, when the last survey was conducted. The report found that economic factors accounted for most of the dealmakers’ concerns, with 61% citing fears of a potential recession and 57% citing tariffs or trade disputes as possible deterrents to future deals.

“I don’t think it’s surprising that dealmakers have mixed opinions at this time,” said Eric McCrath, co-chair of Morrison & Foerster’s Corporate Department. “The environment is changing. There are a number of unprecedented economic factors and political situations currently at play that make accurately forecasting future deal activity more difficult. Also, 2018 was a record year for tech M&A. We’re beginning to see those highs level off and return to a more sustainable model.”

According to 451 Research’s M&A KnowledgeBase, 2019 tech M&A activity currently trails in comparison to the bullish deal volume and value totals of 2018. In the first three quarters of 2019, nearly 2,700 deals valued at $356 billion were completed, whereas 2,854 deals, valued at $447 billion, were completed over the same period in 2018.

Additional key findings, takeaways, and analysis from the Tech M&A Leaders’ Survey include:

Private Equity Forecasts Are Also Mixed

Respondents were also split on how they think tech acquisitions by private equity firms will proceed in the next 12 months, with 35% expecting an increase in activity, 37% predicting activity will stay the same, and 28% anticipating a decrease. According to 451 Research, private equity deals are currently at a slight decline this year, with financial sponsors having completed 7% fewer deals so far in 2019, compared with last year’s record activity. Eight out of ten survey respondents point to higher pricing as a cause for this year’s dip in deals, while nearly the same number (70%) believe that the need to put more equity into each deal also played a part.

Cross-Border M&A Is at a Crossroads

While cross-border M&A is expected to decline across most regions, targets in Asia-Pacific are most likely to be impacted, according to 48% of respondents, who expect a decrease in deal flow into the region by international acquirers. The number is slightly less for Western Europe, where 42% of respondents predict a decline.

The majority of respondents think cross-border activity will remain consistent in South America (58%) and the Middle East and North Africa (52%), while respondents were evenly split about their predictions of North America: 32% think acquisitions by international acquirers of North American targets will increase, while the same number project a decrease.

Trade disputes are considered the biggest potential hindrance to future international acquisitions, with 73% of dealmakers citing it as a concern. Dealmakers are also taking Brexit into account, with 58% anticipating it having an impact. A higher percentage of respondents are also more concerned with CFIUS than they were last year, with 70% citing CFIUS as a possible deterrent to deals compared to 54% in October 2018.

A Drop in Valuations Is Anticipated

A little more than half (54%) of respondents expect private company M&A valuations to decrease in the next 12 months. This correlates with current market trends, according to 451 Research, which found that among private tech companies selling for $100 million or more, the median multiple stands at 5x trailing revenue in 2019, down from 5.3x last year. About the same number (56%) believe both corporate acquirers and private equity firms will pay lower multiples on future deals.

Unicorns Are Losing Their Luster

In last year’s survey, respondents had high hopes for the public debut of enterprise tech companies, with 62% saying they had faith that unicorns would make strong debuts. This year, after seeing the poor performance of a number of consumer tech IPOs despite a surge in high-priced enterprise debuts, respondents are less optimistic in their forecasting. More than half (52%) now believe that the average unicorn would finish its first day of trading with a valuation below its previous post-money, versus 38% who still anticipate a rise in valuations.

Buyers Have New Strategic Priorities

Machine learning continues to grow as a priority for acquirers, according to 84% of respondents who said the technology is becoming more important to strategic goals. This is a significant increase from last year’s survey, in which 66% of respondents viewed machine learning as a driver of more M&A. Nearly three-quarters of respondents believe information security is also becoming increasingly important for acquirers, as is cloud computing, per 71% of respondents.


Now in its 15th edition, the M&A Leaders’ Survey from 451 Research and Morrison & Foerster drew 101 responses, primarily from investment bankers (36%) and C-level or M&A executives (35%), with the remaining responses coming from lawyers, VCs, PE professionals, and others in the M&A community. Roughly 79% of the responses were from dealmakers and advisers based in the U.S., with Silicon Valley representing the largest single location.



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