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Last month's surge in tech M&A spending could give the impression that it's now business as usual in the tech M&A market following a lull in deals at the outset of the pandemic. And although many acquirers are back at it, they're not buying the way they used to. At the top end of the market, they're paying far higher prices than before the crisis.

According to 451 Research's M&A KnowledgeBase, the median multiple paid for tech acquisitions of $500m or more has been on the rise in recent years, hitting a high of 4.4x trailing revenue in 2019. Deals printed early this year were tracking below that level. But since April, stock prices have soared, taking tech M&A valuations with them. Our data shows that the median multiple for $500m-plus purchases over the past five full months stands at 9.6x, more than twice as high as any full year since the dot-com bust.

Over that same five-month period, the S&P 500 Index rose 42%. Tech vendors benefited disproportionately from that, particularly those that got a bump in sales from COVID-19 and its effects. That rise has given them the currency to print larger deals. Many of the biggest multiples have been paid out with stock:

• A doubling of its share price amid enthusiasm over virtual healthcare helped Teladoc print its first 11-figure transaction in acquiring Livongo for $18.5bn (at 88x trailing revenue), 90% of which will be paid in stock. Prior to that purchase, the telehealth firm hadn't crossed the $1bn-mark in any of its previous acquisitions.
• Fastly shelled out $775m for its first big purchase, picking up DevSecOps specialist Signal Science in a deal that's paid for with 74% of the CDN provider's stock. The buyer's share price quadrupled in the four months leading up to the transaction. (Subscribers to 451 Research's Market Insight Service can access our full report on that deal here.)
• The appetite for public tech stocks has helped blank check companies raise capital and strike deals with privately held tech targets. As my colleague Brenon Daly noted in this space last week, there were more SPAC acquisitions of tech vendors in August than in a typical year. Two of those transactions at the end of the month carried valuations north of 90x projected revenue.

Tech acquisitions are often correlated with moves in the stock market, and that link seems particularly direct today. The rise in stock prices helped usher in a busy August and push valuations to extraordinary levels. But those could cool off as the stock market does. While tech firms led the stock market surge since the spring, they've been at the forefront of the downturn in prices over the past week or so. According to S&P Global Market Intelligence's Capital IQ, the S&P 500 Index has lost 6.7% of its value since September 2, while the S&P 500 Information Technology Index has dropped 10.5%.