In the current market conditions, a dream exit a piece of cake, but nothing could be further from the truth.

The time is now… the singer of Moloko sings in the timeless dance hit. The rest of the lyrics (in your arms, I feel sunshine..) suggest that the singer had no mergers and acquisitions in mind when she wrote the song. But the phrase is twistedly appropriate in this context. When it comes to M&A, 2021 can be called historic.

At no time in history has there been so much merger and acquisition activity worldwide. From January to the end of August 2021, deals worth 3,450 billion euros were concluded worldwide, according to figures from data provider Refinitiv, which the British newspaper Financial Times reports. reported about. The worldwide annual record of 3,700 billion euros from 2007 will undoubtedly be broken this year, according to the newspaper. At the time of publication, in mid-November, that moment may already be behind us.

Exuberant mood

The tree M&A activities are caused by a combination of low interest rates, high availability of capital, high corporate profits and an exuberant mood in many boardrooms. Private equity funds, venture capital investors as well as institutional investors and strategic parties are fully involved.

At the fair of the same cloth a suit. There is a real feeding frenzy. The issuance of shares and bonds already reached a record high in 2000, and that record is also expected to be broken this year. Investors are hungry for what is on offer, mainly in IPOs, secondary share issues, bond issues, and stock exchange listings via the so-called SPACs.

Lots of tech deals

Many sectors are contributing to the M&A and stock market boom, but the tech industry is at the top. Of the deals registered by Refinitiv, no less than 21 percent qualifies as a tech deal (in total: 8,742 transactions). Big tech companies like Microsoft and Amazon strengthen itself with numerous smaller acquisitions. In the Netherlands, CM.com, listed on the stock exchange, has been conducting a similar strategy.

Still. Who in these circumstances would have the - completely logical - thought that for entrepreneurs in the Dutch tech industry a dream exit up for grabs, will be disappointed. CM.com saw a first attempt at an IPO fail (it would later succeed via an empty stock exchange shell or SPAC). More recently, in October this year , Coolblue – no small party after all – saw itself forced to postpone its previously triumphant IPO until further notice. In November, the IPO of the Italian software manufacturer MotorK also yielded less than first hoped. Another recent IPO of electric bus maker Ebusco was successful wonderfully.

High risk aversion

How can the euphoria on the one hand and the erratic climate for Dutch tech funds in particular be reconciled? Market researchers invariably point out that the mores in the Netherlands (and also, for example, in Germany) differ greatly from those in the United States. The willingness to finance great companies – such as Coolblue – is certainly there. But the risk aversion of investors is much greater here than in the United States. This applies both to risk investments in the form of venture capital and to new stock exchange listings.

Risk assessments should also be considered for the CoolblueIPO played a role, sources told the Financieele Dagblad. Because of supply-chain problems, it is unclear whether Coolblue will continue to grow that fast next Christmas. Undoubtedly, increased competition such as Amazon.com plays a role in the background.

Expected Valuations

When in doubt, investors – certainly on this side of the ocean – quickly give up. This is all the more so in the current market conditions – where there is a lot of money available and expected valuations are high anyway.

After all, how does that affect tech funds more than other companies? No industry is changing as fast as the tech sector – especially since the COVID-19 pandemic. For example, disrupting software companies as it is now called, companies in other sectors, but also in their own sector. High growth is attractive, but investors – in whatever form – are wondering: Can this continue? When hesitating, they quickly leave. Together with the hoped dream exit.

Sun dream exit is therefore to a large extent an exercise in risk reduction for investors. Read there here more about.