2020 was a record year for deal activity. During the year, 102 M&A deals were announced for over $32B in enterprise value with a median of 7.7x EV / Revenue (9.2x including Latch's SPAC deal announced on Jan 25, 2021). Private placements also notched up a record year with more than $9.7B announced. While some of the highest profile deals were led by SPACs, Private Equity and consolidators from outside the real estate tech ecosystem, 2/3's of all transactions were tuck-ins by strategic investors and this activity was heavily concentrated amongst Residential Real Estate focused technologies.
Based on market feedback that we are receiving, 2021 has the potential to be more evenly distributed between Commercial and Residential Tech with Lodging staging a comeback. SPACs and Private Equity are also well positioned to drive significant deal activity. We estimate that more than $300B of SPAC buying power is currently chasing Tech deals with Real Estate Tech being a key focus area.Already in 2021 we have seen nearly a dozen transactions announced and SPACs have been front and center. TS Innovation Acquisitions Corp., sponsored by Tishman Speyer, started the year off with a bang announcing that it would merge with smart lock developer Latch for $1.053B (58.5x EV / 2020E Revenue or 21.5x EV / 2021E Revenue). This deal will leave Latch with ~$510M of cash to do bolt-on acquisitions – a scenario that we see as being increasingly common as evidenced by Porch.com's M&A spree in which they closed 4 transactions in early January funded with their newly public shares and cash from their recent SPAC deal with PropTech Acquisition Corporation. The deal is also noteworthy because it makes it clear that the market is willing to take a very long view for names that it loves. We expect SPAC post-merger companies to continue to be an important force in real estate tech M&A by using their post-merger cash to snap up rivals while also pushing other suitors to sharpen their pencils on valuation.With Real Estate Tech share prices up ~72% since their trough during the COVID-19 driven market rout in early 2020, and multiples pushing North of 13x, 2021 is set up to be another banner year for deal activity.
© In the U.S., America’s Growth Capital, LLC dba AGC Partners, member FINRA/SIPC. In Europe, America’s Growth Capital Europe, LLP (Appointed Representative Alternatives St. James, LLP which is authorized and regulated by the Financial Conduct Authority). America’s Growth Capital Europe, LLP is a Limited Liability Partnership incorporated in England and Wales (OC368580). Its registered address is 6th Floor, 9 Appold Street, London EC2A 2AP. The testimonials contained herein may not be representative of the experience of other customers or clients. Testimonials are no guarantee of future performance or success. Deals marked with an “*” are non-AGC deals.
