The mergers and acquisitions (M&A) market is constantly evolving, and as we enter 2023, there are many changes happening in the tech industry that could impact the trend. Luis, who works at a private equity-owned software company, shares his thoughts on the topic, discussing the changes he has observed and the potential impact on the M&A market.

One of the most significant changes Luis discusses is the compression of valuations. While valuations of some companies are increasing due to competition, there is a trend towards profitability multiples, which could significantly impact small and medium-sized businesses (SMBs). The shift from revenue-based multiples could make it harder for these companies to raise funds or sell their businesses, and this could lead to an increase in M&A activity.

Luis also notes that the demand for technology is changing, with more variety and nuance in the market. Remote work is here to stay, and companies are selling to global clients, which means that private equity firms need to rethink their target markets and positioning strategies. This shift in demand could create opportunities for M&A activities, as companies look to acquire small businesses that don't have capital or want to be better positioned to grow with a larger owner.

Overall, Luis predicts that the M&A market will heat up in the coming year, as companies face limitations to organic growth and seek to expand through acquisitions. He acknowledges that the changing market conditions and the increasing sophistication of private equity firms could impact the type of companies that are acquired and the strategies employed.

In conclusion, the tech M&A market is changing rapidly, and as we enter 2023, it's important to stay abreast of the latest trends and developments. The shift towards profitability multiples and the changing demands of the market could create opportunities for M&A activities. It remains to be seen how this will play out in the coming year, but it's clear that the private equity industry will continue to play a significant role in the tech sector.

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