Tech M&A Grows In Q3 As Private Funding Slumps

Tech M&A Grows In Q3 As Private Funding Slumps

M&A deal values nearly tripled to USD 2.8 billion, offsetting a sharp fall in PE/VC investments to USD 301 million as investors turned more selective in Q3 2026

Technology sector recorded deals worth USD 3.5 billion in the July-September quarter, up 38 per cent from the previous quarter, as a sharp increase in mergers and acquisitions (M&A) offset a steep decline in private equity and venture capital investments

The sector recorded 76 transactions in the third quarter of 2026, down 5 per cent sequentially, reflecting a shift towards large strategic acquisitions even as private investors became more cautious about deploying capital, according to a Grant Thornton Bharat report.

Mergers and acquisitions (M&A) and private equity and venture capital (PE/VC) investments together accounted for 70 deals worth USD 3.1 billion during the quarter. Public-market issuances provided an additional source of funding, with initial public offerings (IPOs) and qualified institutional placements (QIPs) raising a combined USD 398 million.

M&A deal values nearly tripled from the previous quarter to USD 2.8 billion across 25 transactions, despite a decline in volumes. Outbound acquisitions contributed USD 1.8 billion through six deals, including Persistent Systems’ USD 1.4 billion acquisition of Germany-based Nagarro SE, which ranked as the third-largest outbound transaction in the sector’s history, the report said.

Technology service providers accounted for 16 M&A transactions worth USD 2.8 billion, indicating that large strategic acquisitions drove the quarter’s increase in deal values. M&A activity among start-ups moderated to three transactions, while enterprise software and software-as-a-service (SaaS) deals also softened.

“The ability to turn new capabilities into tangible client outcomes and sustainable growth will be key to attracting investment,” said Raja Lahiri, partner and technology industry leader at Grant Thornton Bharat.

Technology companies are increasingly facing divergent investment trends, with strategic acquisitions remaining strong while investors adopt a more measured approach to growth capital, Lahiri said. Businesses will need to demonstrate clearer paths to profitability and commercial returns as artificial intelligence reshapes the sector, he added.

PE/VC activity, meanwhile, recorded 45 transactions worth USD 301 million, down sharply from USD 1.5 billion in the previous quarter. Despite the decline in capital deployed, early-stage investments, spanning pre-seed to Series A, accounted for nearly 79 per cent of funding rounds, suggesting that investors continued to back companies at earlier stages while exercising greater caution over investment sizes.

Technology startups attracted 27 deals worth USD 125 million, while investments in technology service providers fell to USD 77 million from USD 1.1 billion in the previous quarter.

Enterprise software and SaaS recorded 13 deals during the quarter, even as disclosed investment values declined to USD 99 million. The divergence between transaction volumes and funding values points to more selective capital deployment and a greater focus on scalable business models, the report said.

Public-market activity also recovered in the September quarter after a relatively subdued previous quarter. Three IPOs and three QIPs raised a combined USD 398 million, providing technology companies with an additional avenue to access capital.

The quarterly data points to a technology deal market increasingly driven by strategic consolidation and selective investment, rather than broad-based growth in private funding. While large acquisitions lifted aggregate deal values, the sharp contraction in PE/VC deployment suggests investors are becoming more cautious about the size and commercial prospects of their investments.