In the first 10 months of 2022, private equity investment in technology, media and telecommunication (TMT) companies increased, indicating bright spots in the investment landscape for middle market companies in this sector even though venture capital and private corporate M&A investment activity dropped.
Private equity investment in technology, media and telecommunication companies reached $191.6 billion in the first 10 months of 2022, up from $183.9 billion for the year ending Dec. 31, 2021, according to PitchBook Data. This increase was driven by a rise in both the number and value of large deals, with the average deal size increasing from $157.25 million to $265.51 million.
In contrast, venture capital investment into technology, media and telecommunication companies is down in 2022 compared to last year, both in terms of invested capital and deal count. From January through October, venture capital investment in TMT companies totaled $141.61 billion on 10,672 deals compared to $226.73 billion on 15,066 deals for the year ending Dec. 31, 2021.
The shortfall in venture capital investment and deal count appears to be the largest contributor to the perceived falter in middle market TMT performance. The average deal size also fell from $15.05 million to $13.3 million for the same period. However, in the final two months of 2021, venture capitalists invested $43.84 billion in TMT companies in over 2,426 deals, leaving room for optimism as the end of 2022 approaches.
Private corporate M&A activity in the technology, media and telecommunication sectors also declined, from $14.74 billion in 2021 to $2.03 billion in the first 10 months of 2022. However, this decline was primarily driven by a decrease in the size and number of large deals. The average deal size decreased from $77.56 million in 2021 to $15.52 million for the first ten months of 2021. Last year the top six deals accounted for $11.6 billion of invested capital, each of which exceeded the invested capital total for the largest deal of 2022 thus far.
Despite the overall decline in venture capital and private corporate M&A activity, the middle market TMT sectors have remained relatively resilient. This resilience is likely because middle market tech companies are often seen as more attractive targets for private equity investment. Deals worth $250 million or less continue to account for most of the activity across the three groups of investors as expected, with top 5-10 deal sizes having the largest impact year to date over prior year results.