US market remains subdued despite notable AI deals

While the US tech transaction market isn’t lighting any fires, deals are still being done. Funds, investors and targets are working through the relatively flat conditions, waiting for a time when the expected AI boom hits deal rooms. Signs the market could have seen its nadir was the recent 0.5% cut to rates by the US Federal Reserve. This should signal a renewed period of economic growth and stronger deal flow going into 2025.   
 
According to Ansarada’s deal room data, the Americas experienced no growth year-on-year in new tech and telecoms M&A transactions, with a 50% drop from Q2 2024 to Q3 2024. One positive sign was a 31% rise in new tech and telecoms M&A transactions when comparing Q3 2024 to Q3 2023. Dealogic’s numbers show in the US there were 338 tech deals valued at $34.26 billion announced from January to August 2024. 
 
In software, the standout transaction has been Synopsys’ $35 billion deal to buy Ansys to create a global systems design leader. A close second is Hewlett Packard Enterprise’s $14 billion acquisition of Juniper Networks, a leader in AI-native networks.   
 
February was a big month for US tech deals, driven by healthcare data and technology company Cotiviti’s $10 billion transaction to restructure its capital with long-term partner and tech investor Veritas Capital and private equity group KKR.
 
The largest US AI deal of note this year so far has been Elon Musk’s xAI’s $6 billion Series B funding round. Major investors such as Valor Equity Partners, Andreessen Horowitz and Sequoia Capital took part. The funds will help launch xAI's new products, enhance infrastructure and accelerate research and development initiatives. This deal showed the strong investor interest in AI assets, and will hopefully pave the way for a slew of AI deals in the future.
 
In other AI deals of note, in April, EQT Private Equity announced it was acquiring global supply chain risk management software firm Avetta from private equity firm Welsh, Carson, Anderson & Stowe. 
 
The $3 billion acquisition comes at a time when global supply chains are becoming increasingly complex due to globalisation and digital transformation, alongside a growing focus on safety and compliance. EQT aims to use Avetta’s established platform to support its growth through product innovation, AI and automation adoption and global expansion.
 
The transaction reflects the premium valuations being assigned to companies with unique, hard-to-replicate capabilities. This is driving up the overall value of deals and making M&A a more expensive proposition.
 
There have been a couple of notable transactions in cyber security, with CyberArk acquiring machine identity management firm, Venafi from Thoma Bravo for $1.54 billion. Then, there was the $1 billion Wiz transaction, led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital, as well as Haveli Investments’ $350 million acquisition of ZeroFox.
 
Turning to telecommunications, assets are changing hands as the economics around content, software and infrastructure continue to be re-imagined by forces like streaming, AI and 5G. Jumbo deals in the US this year include SES’s $3.1 billion acquisition of Intelsat.
 
The US tech sector, particularly AI and data analytics, continues to be a hotbed for M&A activity. Companies are investing heavily in these areas to enhance their product offerings, improve operational efficiencies and stay ahead of the curve in an increasingly digital world. Expect considerably more action in this sector in the months and years ahead.