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Fundamentals

Size Analysis: During the quarter, the market capitalization increased to $6.9 trillion, although it has yet caught back up to the levels observed in 2022 Q1. Notably, approximately 132 companies exited the public company space during the quarter. While the number of transactions in the industry declined, the cumulative transaction value increased relative to 2023 Q1.

Public Market Dynamics: Industry performance has shown consistent improvement since 2022 Q3 but has continued to underperform the market (SPX). The top 20 companies in the industry have outperformed the market. The debt-to-equity levels experienced a slight increase to 10.89% over the quarter, although the interest expense-to-revenue ratio remained constant. Gross profit margin and operating expenses as a percentage of revenue increased over the quarter, while the net profit margin declined.

Transaction Trends: A total of 3,392 transactions were recorded, with the transaction value increasing to $119 billion, although the number of transactions decreased. M&A transactions decreased over the quarter and have been on a decline since 2021 Q4. Private placements also declined relative to the last quarter, while public offerings increased compared to the past quarter.

Dispersion Insights: The major contributor to revenue was North America, followed by Asia and Africa. M&A activity was highest in North America, followed by Europe and Africa. There were more private placements relative to public offerings, with North America and Asia leading in private placements. In the case of public offerings, North America and Asia were the major contributors.

Methodology

We screened CapitalIQ using its industry classification. Transactions were filtered by announce date within the last 3 years. Companies were filtered by having a public company type. The main industry selected was "Information Technology". CapitalIQ sector "Software and Services" was used to screen the database. CapitalIQ subsectors "IT Services" and "Software" were used as categories. Our sectors were defined by the CapitalIQ primary industry classification.

THIS REPORT IS NOT TO BE USED OR CONSIDERED UNDER ANY CIRCUMSTANCE BY ANYONE AS INVESTMENT ADVICE

This research report is for informational and discussion purposes only. Information presented here is not investment advice of any kind to any person and does not constitute a recommendation as to the purchase or sale of any interests or as to any other course of action. General, financial, and statistical information concerning the details of this report and related industry are from sources Spaulding Financial believes to be reliable.

Spaulding Financial has accurately reflected such information in this research report; however, Spaulding Financial makes no representation as to the sources’ accuracy or completeness and has accepted this information without further verification. Neither all nor any part of the content of this report may be conveyed to the public through advertising, public relations, news, sales, mail, direct transmittal, or other media without the prior written consent of Spaulding Financial. Spaulding Financial ’s research is as of the date reported herein.

Spaulding Financial has no affiliation with any of the companies comprising the industry used as a basis for research in this report, nor does Spaulding Financial hold any investments in the companies listed herein. The content of this report may be used, in part, as a basis for any work that Spaulding Financial performs for you in the future at the sole discretion of Spaulding Financial. All data is from Capital IQ database.

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