European tech deals boom in tough fundraising market — Dealspeak EMEA

European tech M&A transactions are keeping up a steady pace as some entrepreneurs choose to exit the businesses they founded, rather than struggle for capital in a tough fundraising market.

As a result of this general trend, which Dealspeak EMEA already flagged for artificial intelligence (AI), European tech M&A volumes year-to-date (YTD) are already ahead of the full-year (FY) figures for last year.

Volumes in the YTD are EUR 107bn vs EUR 89bn for FY23, according to Mergermarket data. The YTD volume figure is also ahead of every FY result before volumes started taking off in 2019.

A late burst of large-ticket activity could push 2024 above the FY results for 2020 (EUR 115bn) or 2022 (EUR 123bn), while the score in 2019 (EUR 134bn) is also in the same ballpark. However, the record-breaking results of 2021 (EUR 189bn) look out of reach for now.

The largest deal of the year came in June, when Intel [NASDAQ:INTC] agreed to sell a 49% stake in an Irish joint venture called Fab 34 to Apollo [NYSE:APL]. The sponsor will invest USD 11bn (EUR 9.9bn) in the business.

The Intel deal was so large that it single-handedly super-charged Irish M&A – total M&A is more than double last year’s results. European supply chains for semiconductors are also a hot source of deal activity.

Dual-use tech could drive next record attempt

A year that breaks the 2021 record could come a few years down the line, according to Alberto Onetti, chairman of innovation advisory firm Mind the Bridge.

One factor that could drive the next record attempt will be massive increases in defence spending across the European members of the North Atlantic Treaty Organization (NATO) during Donald Trump’s second term.

Increasing defence budgets are likely to throw the spotlight on dual-use tech, which can be used in both civilian and military contexts, Onetti said

Defence-tech is a tiny part of Europe’s tech ecosystem, largely due to restrictions from limited partners (LPs) on investments in weaponry.

However, around one in four start-ups in NATO countries have tech that could potentially have military use cases, Onetti said. In Israel, more than 60% of start-ups work with the military, he said, adding that this shows the potential of a new source of income in Europe.

Military standards

Drones are one area that Dealspeak EMEA has already highlighted the potential for military use cases alongside civilian ones. Quantum Systems of Germany, which works both with the military and the commercial world, is a name to watch as dual-use tech becomes a theme. It raised a total of EUR 100m in a Series B funding round in September.

Satellites are also an area that can provide a bridge between tech, media and telecoms (TMT) and government contracting in a world of increasing defence budgets. Companies to watch in the space include Open Cosmos, a UK space-tech business, which is in advanced talks with multiple acquisition targets as it seeks to expand its product and geographic footprint.

Back here on Earth, TactoTek, an In-Mold Structural Electronics tech company from Finland, earlier this month announced the completion of a funding round to raise USD 60m led by Nidoco, part of Virala Group. It says its ruggedised electronic components meet military standards.

European tech entrepreneurs are likely to welcome a fresh source of income as NATO governments ramp up defence spending. And – in the long term – the trend could re-energise dealmaking and inspire new record-breaking runs.