GovTech M&A Sees Continued Strength Amid Economic Uncertainty



January 9, 2023

The GovTech market continues to be a leading area for acquisitions, particularly for SaaS companies. As the economic climate continues to be somewhat unpredictable, GovTech is seen as a stable landing spot for investors and buyers. Governments have to continue to run - and they need to find ways to run more efficiently amid growing economic pressures.

There have been more than 5,600 deals since 2018 that cross into the GovTech space, with over 2,500 of these transactions with global SaaS and Software targets.

Governments have traditionally been slow to move to cloud-based solutions but the pandemic pushed governments at many levels to address new challenges that were created: remote workers, collaboration with citizens, updates to government employees, and more. Consequently, the lagging investment in tech across all government levels has reversed, and we are now starting to see a wave of adoption in newer, cloud-based platforms and point solutions.

Private equity firms recognized early on that as socio-economic issues became more uncertain, it was imperative to find less risky, more stable areas of the market in which to invest. GovTech is seen as one such area and as expected, there have been a number of deals driven by PE firms in the last 18 months. Thirty five percent of the SaaS and software deals since 2018 have been done by Private Equity firms.

Private equity raised $250B USD in 2022 YTD, and currently there is over $790B of dry powder in the US alone, seeking to invest in great companies. As a result of the glut of funds still looking to be deployed, the bigger PE firms will continue to drive a competitive market for really good quality companies.

Strategic buyers will likewise see this as a good time to move on acquisitions now that SaaS valuations have normalized to pre-pandemic levels. Those who sat on the sidelines during the effervescent market of 2021 are now looking to longer-term, less risky investments. Great leaders understand that it is vital to continue to pursue both organic and inorganic growth to remain as competitive as possible in a market that is becoming more advanced at an increasingly accelerated rate.

For more information on the GovTech M&A market predictions for 2023, click HERE

Tequity has experience in the GovTech sector and can provide insights in metrics and valuations. If you are interested in a call, connect with us HERE

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