M&A

Exploring The Signs Of Recovery: A Closer Look at Tech M&A And Revenue Multipliers

Illustration of M&A Letters.

Reflecting on an article I penned in December 2021, titled “Tech Revenue Multipliers Are Soaring. Should We Be Worried?” it’s interesting to observe the evolution of the tech funding landscape since then.

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Itay Sagie, founder of Sagie Consulting

At that time, we witnessed an alarming surge in revenue multipliers, with a median of 34 and an average of 72. However, the tides have turned, and a different narrative is emerging. The global economic downturn — combined with high interest rates, growing inflation and geopolitical unrest — has caused a drastic decline in revenue multipliers within the software sector.

In an effort to shed light on this shift, I conducted an analysis of 5,413 software-related M&A deals, published on Crunchbase, that transpired between Q3 2021 and Q2 2023 in the U.S., EU and Israel.

Tech revenue multipliers trend down

I calculated the revenue multipliers over the past eight quarters, leveraging Crunchbase data and examining disclosed M&A prices and revenue, which is available only for a portion of the deals.

The results reveal a decline, with revenue multipliers eventually stabilizing around 5x. It is noticeable that revenue multipliers in Israel tend to be higher than other regions, as it is an attractive destination for global investors seeking innovative deep tech companies.


Moreover, the data showcases a noteworthy decrease in the number of M&A deals. When comparing Q2 2023 to Q3 2021, we observe a significant 41% reduction in M&A activity during this period.

However, it is important to note that the median M&A deal size, particularly the reported deal sizes, remained relatively unchanged, hovering around $70 million.

Nonetheless, it’s worth mentioning that the percentage of deals with disclosed prices dropped from 16% to 8% over the same period. Consequently, it is reasonable to assume that the valuations of deals with undisclosed prices fell below the average.

US and Israeli M&A deals outpace European deal sizes

When breaking down deal sizes by region, a noticeable disparity emerges. The median deal size in the U.S. stands at $175 million, in Israel it’s $93 million, and in Europe it hovers around $38 million.

Europe gains ground in sell-side M&A

The decline in M&A deals is particularly felt in the U.S., as its share dropped from 63% to 54% of all deals. In contrast, Europe experienced an increase in its share, rising from 36% to 45% of all M&A deals.

Meanwhile, Israel’s share remained steady at approximately 2% of total deals.

Prospects for the future

Despite the challenging times faced by the tech industry, there are signs of economic growth in the U.S., exemplified by the 16% growth of the S&P 500 over the past six months.

Companies that prioritize execution, and strike a balance between growth and profitability — with an emphasis on the latter — are poised to weather this storm successfully.

Consolidation via M&A is also inevitable in an environment where private capital is tight and public market access is limited, hence we can expect a rise in tech M&A deals.


Itay Sagie, a guest contributor to Crunchbase News, is a seasoned lecturer and strategic adviser to startups and investors, specializing in strategy, growth and M&A. You can connect with him on LinkedIn for further insights and discussions.

Illustration: Dom Guzman

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