Insights
We partner with clients to address their strategic priorities, providing strategic mergers & acquisitions advice and execution, agented private capital financing services and board advisory services. We leverage decades of experience to navigate through complexity and deliver optimal outcomes.
Following the challenges of 2022, Union Square Advisors, forecasts enticing deal opportunities in the technology industry in 2023.
Outlook Report 2023
Union Square Advisors notes that 2022 created a difficult deal-making environment, marked by stubborn inflation, the war in Ukraine, chronic supply chain problems and the lingering effects of COVID-19. While the firm expects to see volatility continue this year, it is optimistic that the fundamentally solid US economy will lead to a calmer deal making environment. The firm believes the present economic downturn is nearing the bottom and that markets will turn for the better in 2023, with Americans possessing $4+ trillion in savings collectively, individual and institutional investors becoming more eager to provide financing, many companies still hiring and the Federal Reserve moving aggressively to curb inflation.
The report delves into more detail on the following trends in technology, M&A and capital market financings:
Technology M&A: Continued Activity During Challenging Conditions
Despite the tough deal-making environment last year, with market indices dropping to 12-month lows toward the end of 2022, strategic and private equity buyers were still active and printed some large technology deals. Although the macroeconomic and geopolitical backdrop will continue to create volatility for M&A and financings, Union Square Advisors believes we will continue to see strong activity, even if volumes remain low near-term, and anticipates a pickup as the year progresses. It is an attractive valuation environment for buyers, many of which are flush with cash, and targets will need to intelligently evaluate and pursue their strategic and financing alternatives as they navigate the choppy markets.
Private Capital Markets Will Prevail with Creative Investment Strategies
While the macroeconomic environment will remain challenging in 2023, Union Square Advisors predicts that private capital can still be raised by utilizing creative investment strategies. The firm expects strategic investments and heightened activity within private markets, as corporates and sponsors plan to tap into the dry powder held by private credit, private equity, and venture capital investors.
Mega Tech Trends
The technology ecosystem is experiencing both disruption and consolidation, creating an abundance of investment opportunities. In 2023, Union Square Advisors will be watching key trends and areas such as strong risk management software, resilience-based enterprise technologies and infrastructure software, thriving enterprise AI technology and ESG growth, among others.
Know Your Suppliers, Know Yourself
As corporations looked to minimize risks across their supply chains and third-party vendor ecosystems, Know Your Supplier (KYS) solutions continued to grow in importance in 2022. Union Square Advisors expects to see increased investments in risk management technology as large strategics continue to build out their product suites in response to customer demand, regulatory tailwinds and trending technology offerings.
Increased Deal Activity in Infrastructure Software
In 2023, Union Square Advisors expects deal activity within infrastructure software to ramp up as current macro headwinds dissipate. Key trends that are exciting the infrastructure software industry include changes to consumer and enterprise identity infrastructure, the continued consolidation of containers and technologies enabling application containerization, and a shifting investment focus from Web3 to Generative AI.
The Consolidation of Customer-Centric Software
Union Square Advisors is seeing companies focus on consolidating across Customer Experience (CX) software and migrating toward Customer Engagement platforms that serve as the foundation for a complete data strategy. In 2023, the firm expects the shift toward critical software capabilities that can clearly point to ROI will continue, especially with tighter budgets amidst a tighter labor market.
Back Office Technology to Continue its Strong Run
Union Square Advisors expects a positive trend in back office technology in 2023, specifically with supply chain risk management, digital finance and ESG solutions technologies as major focus areas.
AIoT, Industrial Technology and ESG: Trends to Watch
With consolidation activity continuing to accelerate in 2023 and beyond, Union Square Advisors predicts that Next Generation AI and Artificial Intelligence of Things (AIoT) technologies and platforms will continue to be attractive areas for deal activity, as enterprises are looking to future-proof their organizations. The firm also predicts that ESG offerings will continue to be in high demand for enterprises as new government regulations take effect this year.
Chairman's Corner
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Tech Trends
Ted Smith, Union Square Advisors on Bloomberg TV’s The Close
Our Co-Founder and President Ted Smith, talked #techmna and the #PE deal space telling @Bloomberg “most tech corporate balance sheets are flushed with cash, and they want to put that to work.” Watch his segment at the 2:40 minute mark!
August was twice as busy in M&A deal volume as July, says Union Square’s Ted Smith
Ted Smith, our Co-Founder and President, joined CNBC TechCheck Check to discuss his outlook on #techmna for the remainder of the year & how PE deal volume has strengthened YTD. Where does Ted see the most activity happening between now and the end of the year?
Summertime blues: Is M&A downturn finally turning a corner?
Now that summer is over, should investors expect to see #mna activity ramp back up? Our Partner and Head of M&A Wayne Kawarabayashi tells Mergermarket that players are “itching to do deals” but that “getting the stars to align” remains a challenge.
‘Put up the for-sale sign,’ more VCs tell founders as market sours
As market volatility ensues, our Partner and Head of M&A Wayne Kawarabayashi discussed with PitchBook Data why several #startups are having dual-track conversations when weighing their exit options.
