TITLE: Tech Investment Banking: State of the Markets and Outlook for 2H 2023. "State of the tech sector…"
Chris Grose. Co-Head of North America Technology Investment Banking, J.P.Morgan.
Chris Grose: The last 18 months have been quite difficult. Global M&A volumes are down 65%, and U.S. equity issuance is down a staggering 75%.
TEXT: Gobal M&A volumes down 65% from peak. U.S. equity issuance down 75%.
Source: FactSet (and) Dealogic. Note: Peak for S&P and NASDAQ represents 11/19/21. Today for S&P and NASDAQ represents 5/10/23.
Chris Grose: And there's really been just four tech IPOs in ‘22 and ‘23 year to date versus 112 IPOs at the peak in ‘21.
TEXT: Source: FactSet.
Chris Grose:Now,in the spirit of finding bright spots in every dark cloud, we have started tosee some successful IPOs in other sectors.
TEXT:Tech market trends.
Chris Grose:Whatare we looking to set up? The broader tech reopening? First is a recalibrationof peer multiples. What is the Fed's policy going to be as it relates tointerest rates in light of the inflationary environment? What will corporatesand investors ultimately do and think as it relates to their ‘24 and ‘25 growthoutlook? And once they have a better sense of that, we think stability willreturn to the broader markets.
TEXT: Outlook for tech.
Chris Grose:Thefuture today, in my opinion, is as bright as it's ever been. TMC is going tocontinue to be the engine for the US economy and drive the innovation in theway that we live, the way that we work and the way that we function as asociety. Now on the M&A side, companies remain cautious given the macrouncertainty.
Chris Grose:What's the one loan bright spot? It's been sponsor activity. We've seen a good amount of tech privates and we expect to see more.
TEXT: Sponsor Activity - 18 tech funds with $10 billion dollars (plus) of dry powder.
Source: PitchBook.
Chris Grose: And the debt markets have just been, frankly, more resilient than the equity markets. And we expect a relatively healthy financing backdrop to support M&A going forward, whether that's in the traditional leveraged loan market or in the more alternative financers like direct lenders. And last but certainly not least, has been activism. Some notable trends that we're going to be watching very closely going forward include companies facing a sunset of
their super voting shares, as well as the New universal proxy card rules, which are likely to result, in our opinion, and more proxy fights.
TEXT:2023Q1 activism efforts:
- Operational improvements;
- Return of capital;
- (and) Govenance.
Transforming the tech landscape.
Chris Grose:TheA.I. landscape is evolving at an unprecedented pace, and this is not justhappening in the private markets. We're seeing it in the public markets aswell. And then when we look at the velocity of AI, several market studiesanticipate that a few native A.I. companies will scale to a billion and a halfdollars of air in the next 18 months.
TEXT:GenerativeAI Snapshot:
200 billion dollars - capital flow into AI since 2021.
50% of new Series B financing in 2023 (was) allocated to AI.
Source: PitchBook.
Chris Grose:Soin our view, every single company is going to be impacted by AI.
TEXT:J.P.Morgan.
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