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Dry Powder: The Private Equity Podcast

The 2020 Tech Report: Get Used to High Multiples

What goes up might still go up.

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The 2020 Tech Report: Get Used to High Multiples
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The No. 1 sector for private equity due diligence at Bain is the tech sector. That’s held true over six years of rising multiples. It’s all the more true this year, as multiples reach new heights. Investors who remember the dot-com bust might reasonably ask if we’re entering bubble territory. That’s a question I posed to David Crawford, a partner in Bain’s Silicon Valley office and head of our global Technology practice.

“What we’re really experiencing,” he told me on the most recent episode of Dry Powder, “is an extraordinary level of vibrancy and innovation in the tech space right now, driven by a decade of infrastructure and computing architectures being put in place.”

When you dive beneath the multiples and see the confluence of technologies through David’s eyes, the numbers do seem to add up. “What we’re seeing is a reflection of entire industries being disrupted and moved into a more remote, cloud-based delivery model that is just turning out to be extremely, extremely valuable, and I think it has long legs to run from here.”

That said, it won’t be a cakewalk, as David explains in the first of our three-part series on the tech sector. On today’s show, we’ll discuss what’s driving valuations to record heights. We’ll also consider what David calls the “nontraditional” sources of disruption that could knock a perfectly sound deal off its footing.

Read the report

Technology Report 2020: Taming the Flux

Bain’s inaugural report on the state of the industry examines how leading companies are investing in AI and automation, the hybrid cloud, the Internet of Things, flexible supply chains, virtual sales and other tools to increase resilience and accelerate growth.

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